[Click e Stock] "SKIET, Second Half of Next Year Better Than First Half"

[Asia Economy Reporter Song Hwajeong] KB Securities maintained its 'Buy' rating and target price of 240,000 KRW for SK IE Technology (SKIET) on the 17th, expecting that the company will be affected by weak IT demand in China until the first half of next year but will improve in the second half.

SKIET's third-quarter earnings recorded sales of 152.1 billion KRW, up 29% year-on-year, and operating profit of 41.7 billion KRW, up 41%, falling short of market expectations (consensus). Lee Changmin, a researcher at KB Securities, said, "The decrease in China's smartphone production due to semiconductor supply shortages led to poor performance in IT separator sales, and the new business segment also continued to experience sales gaps and losses due to delays in the flexible cover window (FCW) market development." He added, "The operating environment similar to the third quarter is expected to continue in the fourth quarter, so earnings at a similar level to the third quarter are anticipated."

Performance improvement is expected next year. KB Securities estimates SKIET's sales for next year to increase by 51% year-on-year to 913.9 billion KRW, and operating profit to rise by 72% to 278.1 billion KRW. The researcher explained, "The impact of weak IT demand in China is expected to continue until the first half of next year, but with the full-scale operation of the China factory phase 3 and Poland factory phase 1, sales of separators for electric vehicles (EV) will expand significantly, leading to substantial sales growth compared to the previous year."

Particularly, attention should be paid to the trickle-down effect from SK On's production capacity expansion. The researcher said, "Separator sales to SK On are estimated to have a relatively higher average selling price (ASP) due to the ceramic coating process," adding, "The sales proportion to SK On is expected to expand from 26% in 2020 to 44% in 2022, driving overall company performance improvement."

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