[Click eStock] "PI Advanced Materials, 1Q is the Bottom"

Burden of Raw Material Price Increases Causes Sluggish Performance Since 4Q 2021
Expectations for Earnings Improvement Rise from 2Q This Year

[Asia Economy Reporter Minwoo Lee] PI Advanced Materials is expected to show somewhat sluggish performance until the first quarter of this year due to the burden of raw material prices. From then on, a full-scale performance improvement is expected, showing a 'low in the first half, high in the second half' performance trend this year.

On the 6th, Yuanta Securities maintained its 'Buy' investment opinion and target price of 65,000 KRW for PI Advanced Materials based on this background. The closing price the previous day was 52,800 KRW.

In the fourth quarter of last year, a performance below market expectations (consensus) was anticipated due to the off-season. Sales were estimated at 69.8 billion KRW, and operating profit at 14.5 billion KRW, with sales decreasing by 0.1% and operating profit increasing by 14.5% compared to the same period last year. Researcher Kim Kwangjin of Yuanta Securities explained, "While the price increases expected by the market are anticipated to be implemented in earnest from the first quarter of this year, the burden of major raw materials (PMDA, DMF) costs is estimated to rise compared to the previous quarter. However, it is positive that the upward trend in major raw material prices has slowed and is maintaining a firm level."

Performance improvement is expected to proceed in earnest from the second quarter. From the first quarter, price increases of more than 10% are expected, and major raw material prices are analyzed to enter a stable phase after the easing of operational restrictions at the end of next month. The proportion of DMF recycling is also expected to expand from the current 40% to 70% starting in the second quarter, enabling the defense of an annual operating profit margin of about 24%. Especially, since the new production line is scheduled to start mass production from the second half of the year, production capacity will increase, and a 'low in the first half, high in the second half' performance trend is anticipated. This year's expected performance is estimated at sales of 365.4 billion KRW and operating profit of 88 billion KRW, increasing by 21.1% and 15.9%, respectively, compared to the same period last year.

Researcher Kim said, "The current stock price corresponds to a price-earnings ratio (PER) of 20.8 times based on this year's performance, which is at the lower end of the past three years' PER range. Concerns about profitability decline due to rising raw material prices have been reflected, but this can be resolved from the second quarter of this year, and the demand for PI film in the front market remains strong, so attention should be paid to growth potential."