[This Week's Industry Insight] Juseong Engineering Accelerates Growth with New Overseas Clients Secured for 2025

Growth in Core ALD Equipment Market for Semiconductors
New Client Sales Expected from Second Half of the Year

Editor's NoteDear individual investors dreaming of successful investments. How well do you know the stocks you invest in with your own money? In the online environment flooded with unrefined information, Asia Economy aims to be your hands, feet, eyes, and ears to deliver accurate information about companies. Each week, we focus on companies that rank high in stock inquiries by the financial information provider FnGuide, delivering everything from basic information to analyses of related companies such as partners, clients, and investors. We will explain companies' financial status, performance, and future value in an easy-to-understand manner. We meet you every week under the name "This Week's Watchlist," highlighting stocks of interest.

The stock price of Juseong Engineering, which had been performing well, has recently stalled. This is analyzed to be due to one-time expenses in the fourth quarter of last year, resulting in performance that fell short of expectations. However, experts believe that with the visibility of securing new overseas clients, growth will accelerate starting this year. Accordingly, securities firms maintain their target price and 'buy' rating on Juseong Engineering.

Stalled Due to One-Time Costs... Outlook for 2025 'Clear'

Juseong Engineering is a company engaged in manufacturing equipment for semiconductor, display, and solar cell production. It manufactures equipment necessary for the deposition process among various processes and supplies them to clients. Its main product is Atomic Layer Deposition (ALD) equipment, a key device in semiconductor miniaturization processes. As of the third quarter of last year, 80.9% of total sales came from semiconductor equipment.

Last year, on a consolidated basis, it recorded sales of 409.4 billion KRW and operating profit of 93.3 billion KRW, representing increases of 43.8% and 222.6% respectively compared to the previous year. Net profit also rose 205.2% to 103.8 billion KRW. The improvement in last year's performance is attributed to increased sales of semiconductor equipment along with expanded sales of high value-added equipment.

Although overall performance increased in 2024, the stock price declined as the fourth-quarter results failed to meet market expectations. Fourth-quarter sales were 108.3 billion KRW, up 10.2% year-on-year, but operating loss of 1.9 billion KRW was recorded, turning to a deficit. The market had initially expected an operating profit of 27.4 billion KRW in the fourth quarter.

The cause of the performance shock is analyzed to be temporary bonuses and provision accruals. The provisions are a conservative reflection of inventory for solar power equipment supplied to overseas clients in the past and semiconductor equipment pre-produced for shipment domestically and internationally in the first quarter of this year.

Go Young-min, a researcher at Daol Investment & Securities, explained, "Considering recent geopolitical issues related to overseas solar power equipment, there is uncertainty about the timing of reversal. On the other hand, provisions related to pre-produced semiconductor equipment can be reversed in the short term."

Notably, some of this equipment includes units destined for four new overseas memory and non-memory clients being supplied this year, leading to interpretations that this provision issue signals the start of equipment supply to new clients in the first half of this year.

Although the fourth-quarter results left something to be desired, the outlook for this year's performance and industry conditions remains positive. With growth in the core ALD market and the full-scale securing of new overseas clients, performance improvement is expected to become visible. The ALD equipment market is currently estimated at 350 million USD (approximately 513 billion KRW) and is projected to grow at an annual average rate of over 10% until 2032.

According to financial information provider FnGuide, the consensus for Juseong Engineering's 2024 performance is sales of 499.2 billion KRW and operating profit of 158 billion KRW, expected to increase by 22% and 69% respectively compared to the previous year.

Ryu Young-ho, a researcher at NH Investment & Securities, said, "Although there are concerns about the recent downturn in the memory market and potential investment reductions, memory companies' strong intention to reduce the proportion of legacy (general-purpose) semiconductors means conversion investments will continue. This year’s conversion investment by the largest client and new factory investments in the second half are expected to be a turning point for growth."

Researcher Go added, "Clients' front-end process investments are bound to continue strongly this year. If entry into four new overseas memory and non-memory clients begins in the first half of this year, large-scale revenue recognition will start from next year." New clients are planning aggressive expansions based on government subsidies, increasing the likelihood of Juseong Engineering securing orders.

Customer Diversification and Product Base Expansion

According to an NH Investment & Securities report, the performance and stock momentum in the second half are expected to be influenced by two main factors. First, part of the 50 billion KRW solar power equipment orders received previously may be reflected in the second half. Second, orders from new North American clients may proceed. Securing new clients is expected to establish a stable multi-year order base, positively impacting the stock price.

Currently, Juseong Engineering is focusing on securing growth drivers through customer diversification and expanding the product base. Lee Dong-joo, a researcher at SK Securities, analyzed, "They are negotiating entry into new overseas memory clients, with purchase orders expected in the first half and shipments in the second half. Equipment related to TSV (Through Silicon Via) and TGV (Through Glass Via) is also expected to show results starting this year, and expansion into the non-memory market is an important opportunity."

Investment from existing domestic clients is also expected to continue. SK Hynix plans to accelerate investment in front-end 1b (5th generation) for expanding the HBM (High Bandwidth Memory) market, with equipment orders for new factories (M16 and M15X) expected in the first half alongside conversion investments in existing lines.

However, uncertainty in the Chinese market remains a variable. Chinese semiconductor companies expanded DRAM production capacity significantly last year, but this year, investment scale is expected to slightly decrease compared to the previous year.

Researcher Lee explained, "China's memory investment was substantial last year, especially Company C's DRAM production capacity increased from 120K wafers per month in 2023 to 200K in 2024. While semiconductor investment expansion in China will continue, considering the high base effect, investment this year may slightly decrease."

Researcher Ryu forecasted, "Although there are concerns about the high proportion of sales in China, these concerns will ease as securing new overseas clients becomes visible." Researcher Go analyzed, "Sales to Greater China clients will be similar to last year, and performance improvement is expected once entry into new overseas clients is in full swing."

Meanwhile, Juseong Engineering's shareholder return policy is also expected to act as a momentum for stock price increase. On the 31st, Juseong Engineering decided on a cash dividend of 13.1 billion KRW. Including treasury shares acquired last year, the total shareholder return amounts to 63.1 billion KRW.

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