[Click eStock] "Simtek, Expected to Break Record High Earnings Next Year"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating and a target price of 37,000 KRW for Simtek on the 24th, based on the judgment that next year's sales and operating profit will reach record levels.

According to Daishin Securities, Simtek is expected to record the highest quarterly figures, surpassing market expectations in the third quarter. Operating profit on a consolidated basis is forecasted to be 43.1 billion KRW, a 40.4% increase compared to the same period last year, which is higher than the market estimate of 40.2 billion KRW. Sales are analyzed to increase by 12.8% to 350.5 billion KRW during the same period.

The strong sales and operating profit in the third quarter were largely influenced by continuous investments in the MASP segment, resulting in increased sales of high-value-added products such as MCP and FC CSP (including SiP), and server-oriented DRAM (GDDR6), along with a mix effect that raised the overall average selling price. Additionally, the semiconductor substrate market centered on BGA continues to see price increases due to limited supply capacity, with demand concentrated among a few companies. The average USD-KRW exchange rate is estimated to have risen by about 3% compared to the second quarter. Sales and operating profit for the fourth quarter are projected at 359.6 billion KRW and 48.7 billion KRW, respectively.

This year's sales are estimated at 1.3179 trillion KRW, up 9.7% year-on-year, and operating profit at 138.2 billion KRW, up 54%. The operating profit margin is expected to improve by 3 percentage points to 10.5%. Kangho Park, a researcher at Daishin Securities, stated, "Investment in MASP is expanding the proportion of high-value-added sales in both memory and non-memory areas (FD CSP, server-oriented GDDR6). With the rise in average selling prices, the operating profit margin is expected to improve to the 10% range. Furthermore, the increase in demand for semiconductor substrates and limited supply capacity suggest that sales and operating profit growth next year is also possible."

As the transition to DDR5 accelerates next year, Simtek is also expected to benefit indirectly. Considering the specification upgrades and price increases compared to the previous DDR4, additional improvements in operating profit margin are anticipated due to the rise in average selling prices for memory modules and semiconductor substrates. Researcher Kangho Park explained, "Maintaining a high utilization rate without increasing production capacity will contribute positively. It is also favorable that Simtek has secured Samsung Electronics, SK Hynix, and Micron, the global market leaders, as its major customers."