[Click eStock] Simtek, Unstoppable Earnings Surge "Target Price Raised"

[Asia Economy Reporter Lee Seon-ae] Daishin Securities maintained its buy rating on Simtek on the 25th and raised the target price to 60,000 KRW. This adjustment is due to increased earnings.

First, the consolidated operating profit for Q4 2021 is expected to be 66.1 billion KRW (213% yoy / 19.9% qoq), surpassing the previous estimate (61.9 billion KRW) and consensus (61.3 billion KRW), marking the highest quarterly figure. Sales (400.2 billion KRW, 43.5% yoy / 9.3% qoq) are also estimated to exceed consensus (389 billion KRW) and previous estimates (395.8 billion KRW). Annual sales for 2021 (1.37 trillion KRW) and operating profit (163 billion KRW) are projected to increase by 14.4% and 81.6% respectively compared to the previous year.

The profit improvement that began in Q3 2021 is expected to continue into Q4. The year-on-year sales increase is positive, and due to the effect of MSAP investment, high value-added sales are increasing, with an operating profit margin estimated at 16.5%. This is the highest quarterly margin and marks two consecutive quarters with an operating profit margin above 10% (13.8% in Q3).

This year's performance is also expected to reach record highs, with sales (1.61 trillion KRW, 17.2% yoy) and operating profit (23.6 billion KRW, 44.8% yoy) revised upward by 1.1% and 11.5% respectively from previous estimates. Amid sales growth, MSP investment and expansion of high value-added sales are expected to drive the operating profit margin to a record high of 14.6%. In the FC CSP market, with increasing market share and a shift to the mid-to-high-end segment, sales (FC CSP / SiP, etc.) are expected to reach 213 billion KRW, a 34% yoy increase, exceeding overall growth and driving company-wide profitability through a mix effect. Additionally, with a new investment of 107.1 billion KRW (as of January 21, 2022), SiP sales are expected to be added in Q4 2022, leading to expanded sales and proportion of the FC CSP segment and improved profit margins.

In particular, Daishin Securities Research Center stated, "The proportion of MSAP-related sales company-wide is increasing from 55% in 2020 to 62% in 2021, 72% in 2022, and 78% in 2023, indicating that Simtek is transitioning to a high value-added focused portfolio." They added, "Considering the sales and operating profit (including profit margin) estimates for 2021 and 2022, Simtek is evaluated as having the best performance among mid-sized semiconductor PCB companies. Following the increase in PC demand after COVID-19 and the transition to 5G smartphones, timely MSAP investments have been made, leading to an expansion of high value-added sales (FC CSP, FC BOC, MCP, GDDR6), which will demonstrate strong growth."