[Click eStock] Nepes, Positive Subsidiary Facility Investment... Consensus Upward Revision

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment forecasted that Nepes would benefit from the expansion investment of its subsidiary Nepes Arc. However, no investment opinion or target price was provided.

According to Hana Financial Investment on the 13th, among Nepes subsidiaries, Nepes Arc, which is responsible for semiconductor testing, announced new equipment investments due to expansion such as SoC (System on Chip: meaning Application Processor or broadly Integrated Chip). The amount is 99.5 billion KRW, a large-scale investment accounting for 32.96% of total assets of 301.9 billion KRW. The transaction counterparties include Teradyne, a semiconductor test equipment supplier from the United States, and four other companies. Teradyne is the second largest supplier in the semiconductor test equipment market, with strengths in applications such as Application Processor, PMIC (Power Management Integrated Chip), and NAND Flash.

This investment decision is expected to be positive for Nepes Arc’s stock price as it signifies strengthening the post-process partner relationship with customers. For Korean post-process (testing, packaging) companies, annual equipment investments around or exceeding 100 billion KRW require careful decision-making as they surpass EBITDA levels. Recently, companies in the same industry such as Tesna (81.9 billion KRW) and Hana Micron (150 billion KRW) announced test equipment investments. This is because outsourcing test expansion in the non-memory test sector in the upstream industry is visibly continuing.

The 2022 performance consensus for Nepes Arc is sales of 184.5 billion KRW, operating profit of 54.7 billion KRW, and net profit of 45.3 billion KRW, and the impact of this facility investment is likely to lead to an upward revision of the 2022 performance consensus.

Kim Kyung-min, a researcher at Hana Financial Investment, said, "In the Korean semiconductor industry, where non-memory beneficiaries are not as many as memory beneficiaries, this large-scale investment announcement is expected to bring a positive wind to the stock prices of the non-memory post-process (OSAT: Outsourced Semiconductor Assembly and Test) industry."