[Click eStock] "KC Tech, Earnings Improvement Expected... Q2 Is the Right Time to Buy"

Cape Investment & Securities Report

[Asia Economy Reporter Minji Lee] Cape Investment & Securities maintained a buy rating and a target price of 32,000 KRW for KC Tech on the 20th.

In the first quarter, KC Tech recorded sales of 90.4 billion KRW and an operating profit of 15.6 billion KRW, down 20.3% and 27.4% respectively from the previous quarter. Semiconductor equipment sales amounted to 37.7 billion KRW, a 36.2% decrease quarter-on-quarter, as equipment sales related to Samsung Electronics' P2 investment were recognized. Material sales were 35.9 billion KRW, down 2.4% from the previous quarter, but the sales proportion expanded to 39.7%.

Seongsun Park, a researcher at Cape Investment & Securities, explained, "The increase in the proportion of material sales, which have relatively higher profitability compared to equipment, resulted in an operating profit margin of 17.3%, showing favorable profitability relative to sales."

Better performance is expected in the second half of the year. The company recognizes sales based on progress rate, and some of the annual performance may be postponed to 2023 due to delays in the P3 investment. Samsung Electronics' P3 is expected to begin receiving NAND equipment in the second quarter and DRAM equipment in the third quarter. Annual sales are expected to grow 10.3% year-on-year to 380 billion KRW, with operating profit increasing 25.4% to 65.3 billion KRW.

Second-quarter sales are projected at 71.5 billion KRW, with an operating profit of 9.2 billion KRW. Considering the investment schedule, the high proportion of DRAM equipment is expected to cause a performance gap in the second quarter. Researcher Park stated, "Since this is a schedule change rather than a change in the scale of semiconductor investment by clients, the fundamental change is limited."

Researcher Seongsun Park added, "The current stock price is judged to be somewhat undervalued," and "Considering the characteristic of equipment stocks where quarterly performance and stock price have a high correlation, the second quarter, which is the quarterly performance bottom, will be a good buying opportunity."