Techwing Achieves Strong Performance with Semiconductor Inspection Equipment... Derivative Foreign Exchange Losses Are Inevitable [Company Exploration]

Record High Q2 Sales and Operating Profit
Share Buyback and Bonus Shares for Shareholder Returns
Optimistic Outlook for Annual Sales of 312.3 Billion Won Despite Reduced Semiconductor Investment in H2

Stock-listed companies are spreading bonus stock issues like a trend. Since last month, 18 listed companies have announced bonus stock issues. As so many listed companies rush to conduct bonus stock issues, a 'bonus stock theme stock' has even appeared in the stock market. Bonus stock issuance is an act of transferring legal reserves to capital in accounting, so there is no change in the intrinsic corporate value. Shareholders receive new shares according to the bonus stock ratio, but the stock price falls accordingly. Nevertheless, due to optical illusions such as the price appearing cheap or increased trading volume, stock prices tend to rise in the short term after bonus stock issuance. Accordingly, Asia Economy analyzed K Auction and Techwing, companies riding the wave of bonus stock issuance benefits.

[Asia Economy Reporter Jang Hyowon] Semiconductor inspection equipment manufacturer Techwing is focusing on shareholder return policies by simultaneously conducting treasury stock cancellation and bonus stock issuance. This is attributed to its preliminary sales and operating profit in the second quarter reaching record highs. However, attention is focused on the scale of losses as foreign exchange losses are expected to occur in net profit due to a sharp rise in exchange rates affecting derivative transactions.

Good Performance but Expected Foreign Exchange Loss

Techwing is a company that directly designs and manufactures semiconductor testing and inspection equipment and display manufacturing and inspection equipment. The semiconductor test and inspection equipment, Test Handler, is sold to integrated device manufacturers (IDM) and outsourced semiconductor assembly and test (OSAT) companies specializing in packaging and testing.

As of the end of Q1 last year, the sales composition ratio was highest for Test Handler at 56.2%, followed by C.O.K at 21.5%, parts and boards at 12.6%, display evaluation equipment at 4.1%, and PCB design at 5.6%. Display evaluation equipment business is conducted by its subsidiary ENC Technology, and PCB design is handled by Trutec.

Techwing recorded strong performance in Q2 this year. On a cumulative basis for the first half, sales and operating profit increased by 24.5% and 106.6%, respectively, compared to the same period last year. This was due to increased orders for memory handlers as its top client Micron expanded investments. Additionally, strong parts sales including C.O.K due to increased orders from overseas customers for non-memory system-on-chip (SoC) and new equipment supply led to record-high sales.

However, foreign exchange losses are expected to be reflected in Q2 net profit. As an export company, Techwing holds derivative products with a forward foreign exchange sell position worth $32 million (approximately 42 billion KRW) for hedging exchange rate risks. A Techwing official stated, "As the maturity of the derivative products with forward foreign exchange sell positions approaches, trading losses will occur and be reflected in Q2 net loss. The exact scale has not yet been calculated."

Although semiconductor companies' investments are expected to shrink in the second half due to concerns about a global economic recession, experts have an optimistic outlook on Techwing's performance. According to financial information provider FnGuide, Techwing's sales forecast for this year is 312.3 billion KRW, expected to increase by 22% compared to the previous year. Operating profit is estimated at 62.1 billion KRW, anticipating a 71.6% growth.

Treasury Stock Cancellation and Bonus Stock Issuance

Techwing is implementing an active shareholder return policy. First, on the 12th, Techwing announced it would cancel 474,364 shares of treasury stock, accounting for 2.45% of the total issued shares. To this end, Techwing had purchased treasury stock worth about 7.3 billion KRW.

It also decided on a bonus stock issuance. On the 13th, Techwing announced a 1-for-1 bonus stock issuance for all 18,439,641 shares. This means shareholders holding one Techwing share will receive one additional share. The bonus stock issuance funds will be covered by approximately 9.2 billion KRW of capital surplus from share premium.