[Click eStock] "Wonik IPS, Profit Growth Concerns... Investment Rating Downgraded to 'Neutral'"

Samsung Securities Report
Target Price Down 8%

[Asia Economy Reporter Minji Lee] Samsung Securities changed its investment opinion on Wonik IPS to neutral on the 23rd. This decision was based on the assessment that it is difficult to expect further stock price increases. The target price was lowered by 8% from the previous level to 32,000 KRW.

Wonik IPS is expected to achieve record-high sales of 307.9 billion KRW in DRAM-related revenue in 2024, but due to the slower recovery pace of NAND and Chinese OLED equipment, the total sales for 2024 are projected to be 997.4 billion KRW. This is about 80% of the 2021 sales, which benefited from the DRAM equipment investment cycle.

Even if sales recover, the increased fixed costs remain a burden. Fixed costs more than doubled over the five years from 2017 to 2022. In 2017, with sales of 630 billion KRW, the company generated a profit margin in the 19% range, but in 2024, despite nearly 1 trillion KRW in sales, the profit margin is expected to be only around 9%. Researcher Hyunggeun Ryu of Samsung Securities said, “A large portion of fixed costs is R&D investment, and while the technological difficulty is increasing, sales growth is in a situation where it is difficult to leverage technology investment.”

For the stock price to rebound, other momentum is needed. Samsung Securities expects that it is time to expand the company’s equipment sales ratio per unit investment amount in the DRAM equipment sector. Additionally, they emphasized the importance of diversifying customers who can leverage R&D costs and the expectation of meaningful investment expansion in NAND and display sectors. Researcher Ryu said, “Unlike last year when customer diversification was achieved, this year the proportion of captive (affiliate) customers is expected to increase. Samsung Display’s 8th-generation OLED investment is positive but is judged to be insufficient.”

Meanwhile, the company’s sales for the first quarter are estimated at 167.6 billion KRW, with an operating loss of 2.3 billion KRW. Researcher Ryu explained, “Sales are expected to recover from the first quarter low point through the fourth quarter, and meaningful recovery based on Samsung Display and semiconductor investment expansion will appear from the first quarter of next year.”

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