[Into the Stock] Daeduck Electronics, Swift New Business Investments Hit the Mark... Continues Record-Breaking Performance Streak

Daeduck Electronics Target Stock Price Average 22,500 KRW
Brokerage Industry Sees Ample Room for Further Price Increase

[Asia Economy Reporter Park Jihwan] Daeduck Electronics continues to record its best-ever performance through swift investment decisions anticipating the semiconductor supply shortage situation. Notably, sales of 150 billion KRW next year and 300 billion KRW in three years are also forecasted from new business products alone. Recently, Samsung Group's 240 trillion KRW investment decision has further brightened the outlook for Daeduck Electronics' core business, semiconductor package substrates.

Clear Performance Improvement...Bright Second Half with New Product Lineup

Daeduck Electronics is a manufacturer of printed circuit boards (PCBs) used in semiconductors (DRAM, NAND flash), communication equipment, smartphones, camera modules, and in-car set-top boxes. PCBs are substrates that allow electricity to flow without using wires when connecting circuits between electronic components and are used in all electronic products.

Recently, Daeduck Electronics' performance has shown a clear upward trend due to the favorable conditions in the front-end industries where its main product lineup is used. Operating profit on a consolidated basis for Q2 this year was 13.3 billion KRW, a 143% increase compared to the previous year. Sales and net profit also rose by 4.9% and 365%, respectively. This reflects price increases of key products such as FC CSP (Flip-Chip Chip Scale Package) and MCP (Multi-Chip Package), high utilization rates, and an expanded proportion of high value-added products.

The outlook for the second half remains bright, with expected sales growth and mix effects in semiconductor substrates. Sales of the new product FC BGA (Flip-Chip Ball Grid Array) are expected to be reflected, entering a phase of significant operating profit expansion. According to FnGuide, operating profit for the second half is expected to be 35.6 billion KRW, a 1.9-fold increase compared to 18.7 billion KRW in the first half. Estimates are 18 billion KRW for Q3 and 17.6 billion KRW for Q4. Annually, sales are projected to continue the record-breaking streak with 969.2 billion KRW this year, 1.1657 trillion KRW in 2022, and 1.3185 trillion KRW in 2023.

Continued Semiconductor Supply Shortage...Successful Swift Preemptive Investment

Daeduck Electronics recently completed and started shipments from a new FC-BGA plant, into which 90 billion KRW was invested last July. FC-BGA substrates are mainly used in non-memory semiconductors. They are applied to system semiconductors used in high-performance systems such as electric vehicles, servers, and data centers. Due to high technological entry barriers, only about ten companies worldwide, including Ibiden, Shinko Denki, and Samsung Electro-Mechanics, are mass-producing these substrates.

Until now, Daeduck Electronics has mainly focused on memory-centered semiconductor substrate business. FC-BGA is a business that Daeduck Electronics is intensively nurturing to expand into the non-memory semiconductor market and transition to high value-added businesses. Following memory, the company plans to solidify its position as a specialized semiconductor substrate company by establishing a non-memory lineup as well. Shin Younghwan, CEO of Daeduck Electronics, stated, "We will repay customers' trust with yield and quality and accelerate growth based on technological capabilities to achieve annual sales of 300 billion KRW from new products by 2024."

The global semiconductor market is currently experiencing strong demand with supply shortages. Especially, the shortage of non-memory semiconductors is intensifying, and the supply shortage is expected to continue until the year after next. Kwon Seongryul, a researcher at DB Financial Investment, said, "Both FC-BGA and FC-CSP semiconductor package substrates are in shortage, leading to price increases, and companies with stable capacity enjoy high profits, making it a hot market. Daeduck Electronics made timely investments in FC-BGA and is a player recently attracting attention in the package substrate market, warranting investor interest."

Lee Jongwook, a researcher at Samsung Securities, said, "Compared to competitors' expansion or entry speed, Daeduck Electronics made swift moves to timely enter an industry facing supply shortages. I believe there is no difficulty in FC-BGA sales growing to 150 billion KRW next year."

Samsung's 240 Trillion KRW Investment...A Historic Boon for Daeduck Electronics

Samsung Group's recent announcement of a 240 trillion KRW investment plan is also a significant boon for Daeduck Electronics. The securities industry expects about 90% of the 240 trillion KRW, approximately 200 trillion KRW, to be concentrated on Samsung Electronics, and the semiconductor sector including Samsung Electronics is expected to benefit positively. Park Kangho, a researcher at Daishin Securities, said, "Samsung Electronics will increase investment proportion focusing on non-memory and foundry in the system semiconductor field. As the portfolio diversifies from memory-centered to non-memory and foundry areas, demand for semiconductor PCBs such as FC BGA, SiP, and FC CSP is expected to increase."

Target price upgrades in the securities industry are also continuing. The securities industry expects Daeduck Electronics to accelerate its stair-step external growth starting in the second half. Daeduck Electronics' stock price closed at 18,650 KRW on the 25th, up 48% year-to-date. During the day, it rose to 19,750 KRW, setting a 52-week high. Currently, the average target price for Daeduck Electronics in the securities industry is 22,500 KRW.

Lee Dongju, a researcher at SK Securities, said, "The supply shortage of package substrates centered on FC-BGA and FC-CSP is intensifying and is expected to continue until 2022," raising Daeduck Electronics' target price from 19,000 KRW to 21,000 KRW, a 10.5% increase. Daishin Securities also newly set a target price of 24,000 KRW, up 20% from the previous 22,000 KRW.