[Click eStock] "Techwing, Operating Profit Expected to Increase by 60% Year-on-Year This Year"

Cape Investment & Securities Report

[Asia Economy Reporter Minji Lee] Cape Investment & Securities maintained its buy rating and target price of 26,000 KRW on Techwing on the 18th, expecting solid performance in the second half of the year.

In the first quarter, Techwing's sales amounted to 66.9 billion KRW, down 1.8% from the previous quarter, while operating profit rose 82.9% to 14.2 billion KRW. This reflected strong sales of memory and non-memory handlers as well as C, O, K segments. Due to increased investment by memory clients, sales of memory handlers increased by 25% compared to the previous quarter, and non-memory handlers recorded a significant 589% increase quarter-on-quarter due to the addition of new clients. The C, O, K segment grew 30.4% quarter-on-quarter due to chip replacement demand.

Seongsun Park, a researcher at Cape Investment & Securities, said, "With no one-time costs reflected in the fourth quarter, sales expansion, improved equipment mix, and increased sales of the highly profitable C, O, K segment led to a significant improvement in operating margin to 21.2% compared to the previous quarter," adding, "Demand for memory handlers remains solid, so strong performance is expected in the second half."

Researcher Park also forecasted demand expansion centered on North American clients in the second quarter. Non-memory sales are also expected to reflect not only new clients but also existing client sales in earnest. Second-quarter sales are expected to reach 83.3 billion KRW and operating profit 20.6 billion KRW, up 24.4% and 45.2% respectively from the previous quarter. While client investments continue in the second half, the company's additional performance upside lies in the SSD handler segment.

In the case of SSD handlers, demand for inspection equipment and handlers has been sluggish due to a shortage of SSD controllers. However, considering the expected improvement in SSD controller supply in the second half and NeoSem's recent announcement of a supply contract worth 54.6 billion KRW for North American clients, the demand for the company's handler equipment in the second half is analyzed to have significant growth potential. Researcher Seongsun Park analyzed, "Techwing assumes conservative sales estimates for SSD handlers, so actual equipment orders could lead to upward revisions of performance estimates."

The increasing lead time for global semiconductor equipment is also positive. Lead times for non-memory equipment manufacturers overseas, such as in the U.S. and Japan, are on the rise, so companies without production disruptions are expected to benefit indirectly. Researcher Park said, "Since the company's equipment is delivered by air, it is free from issues related to maritime logistics difficulties," and added, "The company's total sales this year are expected to reach 311.7 billion KRW and operating profit 60.5 billion KRW, up 21.8% and 67% respectively compared to the same period last year."

He continued, "Although the company has experienced a sharp decline due to poor performance in the second half of last year and has been affected by the semiconductor sector's stock downturn, attention should be paid to the fact that profitability is improving with more diversified equipment compared to the past."