[Asia Economy Reporter Park Jihwan] Shinhan Financial Investment evaluated on the 17th that DB HiTek is highly likely to revise upward its performance outlook for this year as full-scale price increases have begun. The investment opinion of Buy and the target price of 74,000 won were maintained.
On the day, Choi Doyeon, a research fellow at Shinhan Financial Investment, explained, "The foundry supply shortage is intensifying," adding, "Following the semiconductor supply shortage for automobiles, there is even a production halt issue at foundry companies such as Samsung Electronics due to the cold wave in the U.S." Since the end of last year, price increases in the 8-inch foundry industry have started. DB HiTek has already secured most of its annual order volume for this year and is understood to have started price increases for some products from wafer input in February. It is estimated that they succeeded in raising prices by 20-30% for power chips and DDI (Display Driver IC) for some customers.
The possibility of upward revision of this year's performance outlook is increasing due to the price increase. Research fellow Choi said, "This year's sales are expected to increase by 9.6% year-on-year to 1,025.9 billion won, and operating profit is expected to decrease by 0.9% to 237.3 billion won," adding, "Considering the 72.3 billion won increase in depreciation expenses due to the change in the useful life of machinery and equipment, this is the best performance ever."
It is expected that the gradual reflection of foundry price increases by customer and product will contribute to performance. There is also a very high possibility of upward revision of performance estimates due to future price increases.
Recently, the stock price has fallen by 19.3% from its peak. The reasons for the stock price decline were the valuation multiple increase due to the change in the useful life of machinery and equipment and disappointment caused by the delay in the expected capacity expansion momentum. However, the change in the useful life of machinery and equipment is merely an accounting issue, not a fundamental factor, and the capacity expansion delay issue has already been sufficiently reflected in the stock price. He said, "Although not immediately, the change in the useful life of machinery and equipment shows traces of strategic consideration that capacity can be expanded at an appropriate time."
Research fellow Choi emphasized, "The average selling price (ASP) increase due to the 8-inch foundry supply shortage, attractive valuation, and financial soundness different from the past, such as the expected debt ratio of 41.1% this year, are investment points."
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