[Click eStock] "PI Cheomdan Sosae, Burdensome Raw Material Cost Increase"
[Asia Economy Reporter Gong Byung-sun] PI Advanced Materials posted third-quarter results this year that fell short of market consensus. Despite recording the highest quarterly sales ever, driven by the peak season effect, profitability was impaired due to rising raw material costs.
According to Yuanta Securities on the 26th, PI Advanced Materials' third-quarter sales increased by 8.4% quarter-on-quarter to 80.3 billion KRW, while operating profit decreased by 11.2% over the same period to 19.2 billion KRW. These figures are 7.31% and 23.06% below their respective consensus estimates.
The overlapping negative factors are interpreted as the reason PI Advanced Materials' results fell short of expectations. Various phenomena such as the global semiconductor chip shortage and logistics difficulties affected sales. Additionally, the price increase of dimethylformamide (DMF), one of the key raw materials, raised cost burdens. Consequently, operating profit margin also declined by 5.2 percentage points compared to the previous quarter, damaging profitability.
This impact is expected to continue into the fourth quarter. The rise in prices of key raw materials such as DMF is forecasted to persist. Furthermore, sales of flexible printed circuit boards (FPCB) and PI films for heat dissipation sheets will inevitably decline as they enter the seasonal off-season. Accordingly, PI Advanced Materials' fourth-quarter sales are estimated to decrease by 3.8% quarter-on-quarter to 77.2 billion KRW, and operating profit is expected to fall by 10% over the same period to 17.2 billion KRW.
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Nevertheless, Yuanta Securities maintained its 'Buy' investment rating and target price of 65,000 KRW for PI Advanced Materials. Kim Kwang-jin, a researcher at Yuanta Securities, said, “Based on expanding the DMF recycling ratio from the existing 40% to 70%, growth in scale and profitability improvement are expected,” adding, “The current stock price is judged to fully reflect concerns about second-half performance.” The previous day’s closing price of PI Advanced Materials was 51,600 KRW.
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