[Click eStock] Wonik IPS, Bottoming but in Investment Adjustment Phase 'Hold' · 'Target Price ↓'

[Asia Economy Reporter Lee Seon-ae] BNK Investment & Securities announced on the 11th that it maintains a hold rating on Wonik IPS and lowers the target price to 32,000 KRW. Although expectations for a valuation bottom have increased due to the recent sharp decline in stock price, unlike the past five years when short inventory adjustments occurred during a rising long-term equipment investment cycle, this time there is a risk that the investment adjustment phase may be prolonged.

As demand expectations decline and days of inventory held reach record highs, memory companies are showing signs of reducing capital expenditures in the second half of the year. However, with the extended inventory adjustment period in distribution channels, the inventory levels of memory companies are expected to increase further in the third quarter. Minhee Lee, a researcher at BNK Investment & Securities, explained, "Wonik IPS's third-quarter sales are expected to increase to 332 billion KRW (due to deferred semiconductor equipment sales growth and the inclusion of new OLED fab sales), but the full-year 2022 sales forecast is lowered from 1.31 trillion KRW to 1.07 trillion KRW."

Meanwhile, second-quarter sales recorded 199.8 billion KRW (-4% quarter-on-quarter, -54% year-on-year), and operating profit was 18.5 billion KRW (-16%, -82%), missing market consensus by 27% and 52%, respectively. Due to the rescheduling of customer investment plans reflecting decreased demand, equipment deliveries were delayed, and some sales were deferred to the third quarter, resulting in semiconductor equipment sales of 184.3 billion KRW (20% quarter-on-quarter, -50% year-on-year), falling 17% short of expectations. Display sales also dropped sharply to 15.6 billion KRW, down 72% from the previous quarter, due to postponed OLED supplementary investments and reduced new fab investment scale.