[Click eStock] Simtek, Lowered Multiple "Valuation Attractiveness Increases"

[Asia Economy Reporter Lee Seon-ae] DS Investment & Securities announced on the 7th that it maintains a buy rating and a target price of 50,000 KRW for Simtek.

Kwon Tae-woo, a researcher at DS Investment & Securities, explained, "We expect the relative valuation attractiveness within the sector to be highlighted as the front-end inventory adjustment phase concludes in 2023," adding, "We maintain a mid- to long-term buying perspective."

Due to the semiconductor industry's down cycle, Simtek's current stock price performance is sluggish. Although it cannot avoid the impact of weak front-end demand, it has secured profit resilience with an operating profit margin (OPM) exceeding 20% through expanding its high value-added portfolio. Considering the lowered multiples (domestic and international 2023 price-to-earnings ratio (PER) of 5.1 times), Simtek's 2023 PER stands at about 3.3 times.

Next year, attention should be paid to high value-added products. In 2023, sales of module PCBs are expected to decline by 2% compared to the previous year amid continued front-end demand burdens, while sales of semiconductor substrates are projected to grow by 4.7%. This is mainly due to the expansion of the high value-added product ratio (SiP) following the new 9th factory, expected to start operations in the first quarter of 2023. Although there were concerns about overall raw material cost increases, cost increases are expected to be limited due to the expansion of similar processes compared to existing ones. While the overall company sales growth is expected to slow in 2023, the increase in operating rates of high value-added lines is encouraging for margin preservation, and profitability is expected to remain solid.

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