[Click eStock] "Silicon Works, Structural Earnings Improvement Expected... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment on the 17th forecasted that Silicon Works will achieve structural performance improvement and raised the target stock price from the previous 95,000 KRW to 120,000 KRW. The investment opinion was maintained as 'Buy.'

Researcher Sohyeon Chul of Shinhan Financial Investment explained, "Considering the high value-added organic light-emitting diode (OLED) driver IC (D-IC) sales of 746 billion KRW and operating profit of 226.6 billion KRW this year, the target stock price was raised by 26.3%."

Silicon Works recorded a surprise earnings performance in the first quarter of this year. The first-quarter sales increased by 90.8% year-on-year to 405.6 billion KRW, and operating profit rose by 406.1% to 59.2 billion KRW. Researcher Soh said, "It recorded an earnings surprise greatly exceeding the consensus (operating profit of 30.1 billion KRW)," citing factors such as increased sales of high value-added OLED TV D-ICs, price increases due to D-IC supply shortages, and the elimination of one-time costs as reasons for the earnings surprise.

There is an expectation of structural improvement in the business due to the surge in OLED D-IC sales. With LG Display's OLED TV line and plastic OLED (POLED) line expected to operate at full capacity this year, OLED TV panel production is projected to increase by 71.7% year-on-year to 7.87 million units, and shipments of POLED panels to strategic customers are expected to double to 50 million units. Researcher Soh said, "The margin for OLED D-ICs is significantly higher than that for LCD D-ICs, so performance will greatly improve," adding, "Due to the global semiconductor supply shortage, the shortage of display D-IC supply will continue, and Silicon Works' display D-IC prices are expected to remain strong throughout the year."

Shinhan Financial Investment projected Silicon Works' sales and operating profit for this year to increase by 44.5% and 140.4% year-on-year, respectively, reaching 1.6786 trillion KRW in sales and 226.6 billion KRW in operating profit.

The stock price is expected to have further upside potential. Researcher Soh said, "The stock price surged recently due to expectations of price increases caused by D-IC supply shortages," and added, "Structural performance improvement is expected due to the increased proportion of OLED D-ICs this year, so further stock price gains are possible."