[Click eStock] "Wonik QnC, Demand Increases Regardless of Semiconductor Cycle Through Portfolio Diversification"

[Asia Economy Reporter Kwon Jaehee] Shinhan Financial Investment on the 19th gave Wonik QnC a 'Buy' rating and set a target price of 46,000 KRW.

Wonik QnC is a leading company in the materials and components sector, expected to experience structural growth. The increasing complexity of process technology and continuous demand for capacity expansion, along with diversification of customers expanding the product portfolio, are driving increased demand from clients. This explains the high growth independent of the semiconductor cycle.

This year, Wonik QnC's performance is expected to reach sales of 746.2 billion KRW and operating profit of 130.9 billion KRW, representing increases of 20% and 51% respectively compared to the previous year. In particular, the rise in quartz sales?a consumable used in semiconductor etching equipment?and improved subsidiary performance are expected to boost the operating margin by 17.5%.

The key point in the Q1 earnings announcement is Momentive. Wonik QnC procures raw materials for semiconductor quartz consumables through its subsidiary Momentive. Momentive processes quartz ore into basic raw material forms and supplies it to quartz consumable companies; the volume supplied to Wonik QnC's quartz division accounts for about 10%. In Q4 last year, Momentive raised prices of major products by about 8%, with simultaneous growth in price and quantity driven by increased demand for aircraft parts due to reopening and semiconductor parts demand.

Performance growth in the second half of the year is also certain. Additional price increases are possible due to price pass-through from new contract expansions and inflation. Momentive's operating profit in 2022 is estimated at 47.1 billion KRW, a 278% increase from the previous year. With expected supply shortages and demand expansion, further upward revisions are anticipated.

Wonik QnC's expansion announcement also confirms demand. In April, Wonik QnC announced an investment of approximately 59.5 billion KRW in quartz manufacturing plant facilities, with the effects of expansion expected to be reflected from Q2 2023 upon completion of the plant and equipment setup. Overseas facility investments (including non-memory) previously announced are also scheduled for completion in the second half of this year. This is evidence that quartz demand in the market is expanding regardless of the semiconductor cycle.

Researcher Oh Kangho of Shinhan Financial Investment stated, "In addition to Wonik QnC's performance growth this year, it is expected to benefit from rising raw material prices. The mid- to long-term growth story due to customer expansion and product diversification is also positive, making it highly attractive in valuation among domestic consumable companies."