[Click eStock] Simtek, Non-memory Sales Expansion Expected 'Target Price Up'

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment maintained its 'Buy' rating on Simtek on the 25th and raised the target price to 30,000 won.

Kim Rok-ho, a researcher at Hana Financial Investment, explained, "The target price was calculated by applying a price-to-earnings ratio (PER) of 12 times to the 12-month forward earnings per share (EPS)," adding, "The increase in PER is justified by the valuation premium due to the expansion of non-memory sales proportion."

Simtek announced a 40 billion won investment alongside its earnings report, aimed at responding to the increased demand for MSAP substrates and SiP module substrates. SiP module substrates are items experiencing rapid demand growth due to the widespread adoption of 5G, which is positive in terms of future growth visibility and the expansion of non-memory sales proportion. Domestic package substrate companies are currently in a phase where the benefits from memory substrates due to the transition to LPDDR5 and DDR5 until 2022 remain valid, while securing valuation premium factors from the expansion of non-memory sales proportion.

Simtek's 2021 sales are expected to reach 1.2449 trillion won, and operating profit is forecasted at 111.4 billion won, representing increases of 4% and 24% respectively compared to the previous year. The sales growth is minimal because the average exchange rate in 2020 was 1,180 won, whereas the assumed average exchange rate for 2021 is 1,080 won, reflecting a decrease factor of over 8% due to exchange rates. The sales in the module PCB segment are estimated to decrease by 11% year-on-year in 2021 as the rebound effect from the COVID-19-related shutdown of the Chinese factory in the first half of last year weakens.