[Click eStock] "Seoul Semiconductor Passes Earnings Bottom... Partial Easing of Automotive Semiconductor Supply"

[Asia Economy Reporter Lee Jung-yoon] Hana Financial Investment maintained a buy rating and a target price of 21,000 KRW for Seoul Semiconductor on the 11th, estimating that its performance will improve in the 2nd to 3rd quarters of this year.

Seoul Semiconductor's sales in the first quarter of this year amounted to 284.5 billion KRW, down 8% from the previous year, and operating loss was 7 billion KRW, turning to a deficit. Both sales and operating profit fell short of consensus estimates. The poor performance was due to the European economic recession, production disruptions caused by COVID-19, and weakened demand for TVs, PCs, and smartphones. Compared to the previous quarter, the deficit widened due to decreased sales and losses from safety stock valuation. Additionally, costs increased due to yield issues in the early mass production of new business products such as MiniLED. However, considering that the consolidated subsidiary Seoul Viosys recorded an operating loss of 15.4 billion KRW, the standalone basis showed a profit.

Seoul Semiconductor's sales in the second quarter of this year are projected to be 308.2 billion KRW, down 9% year-on-year, and operating profit is expected to decrease by 56% to 10.2 billion KRW. Kim Rok-ho, a researcher at Hana Financial Investment, explained, "IT-related sales are expected to increase quarter-on-quarter as supply for MiniLED TVs begins despite weakened demand for TVs, smartphones, and PCs," adding, "Automotive sales are also expected to increase quarter-on-quarter as the supply situation of automotive semiconductors has somewhat eased, showing a clear recovery trend."

He continued, "Along with the increase in sales, no one-time costs are expected to occur, and the performance of the consolidated subsidiary Seoul Viosys is also estimated to improve quarter-on-quarter, making a return to profitability possible," adding, "In the recent overall demand slowdown for IT products, automotive sales being the main factor in performance recovery is a point that can differentiate the company."