[Click eStock] Deoksan Neolux, Industry Outlook Positive, Maintains 'Buy'

[Asia Economy Reporter Lee Seon-ae] KB Securities announced on the 9th that it maintains a buy rating and a target price of 93,000 KRW for Duksan Neolux. The target price is maintained due to minimal adjustments in earnings and changes in WACC. The current stock price shows an upside potential of 66.7% compared to the target price.

In the third quarter, sales and operating profit reached record highs at 58.6 billion KRW (+44.3% YoY, +35.5% QoQ) and 16.3 billion KRW (+46.7% YoY, +60.5% QoQ, OPM 27.9%), respectively, surpassing consensus operating profit and KB Securities estimates by 2.8% and 6.1%. Seasonal peak demand led to increased shipments of North American smartphones and IT OLED materials, along with higher operating rates, resulting in simultaneous growth in scale and profitability. Quarterly selling and administrative expenses rose to 5.05 billion KRW due to a one-time cost related to material patent rights. The fourth quarter operating profit is estimated to slightly decrease to 15.2 billion KRW (+6.3% YoY, -6.8% QoQ, OPM 27.6%) compared to the third quarter.

Duksan Neolux’s current stock price has fallen 23% from its peak (August 31), due to market concerns over ① OLED operating rate declines caused by IT supply chain issues and ② diminished expectations for new materials. Notably, global OLED material company UDC’s stock dropped 5.5% after its earnings announcement, citing ① increased volatility in China-related performance and ② potential raw material price increases. However, ① OLED shipments for laptops are expected to double again in 2022, and ② global foldable smartphone shipments are projected at 18 million units (+125% YoY) in 2022, suggesting that the trend of material market growth driven by OLED area expansion will continue.

KB Securities analyst Hwang Go-woon explained, "Duksan Neolux has a diversified product portfolio compared to peers, allowing it to benefit simultaneously from favorable market conditions and new product launches. Additionally, it faces less burden from raw material price increases, which lowers profit uncertainty."

This content was produced with the assistance of AI translation services.