[Click eStock] Wonik Materials, Record-Breaking Performance Streak

[Asia Economy Reporter Lee Seon-ae] Shinhan Investment Corp. announced on the 18th that it maintains a buy rating and a target price of 39,000 KRW for Wonik Materials. Based on the previous closing price of 30,400 KRW, there is a potential upside of 28.3%.

Choi Do-yeon, a researcher at Shinhan Investment Corp., stated, "The current stock price reflects concerns of a peak out with a price-to-earnings ratio (PER) of 4.7 times for this year, but considering the high possibility of earnings growth in 2023, the current stock price is attractive." He added, "Sales are linked to Samsung Electronics' semiconductor production capacity (capacity)," emphasizing, "Since Samsung Electronics' semiconductor capacity market share is expected to increase compared to competitors from 2023 to 2024, it is relatively preferred among small and mid-cap semiconductor stocks."

Since the Russia-Ukraine war, prices of semiconductor rare gases have surged sharply due to supply shortages. Wonik Materials procures semiconductor rare gases as products and supplies them to customers. As a result, sales have surged since the first quarter, recording record earnings through the third quarter. In the fourth quarter, sales of 170.3 billion KRW and operating profit of 26.8 billion KRW are expected, marking the highest performance ever.

The annual performance for 2022 is expected to show a significant increase with sales rising 79.9% to 558.9 billion KRW and operating profit jumping 81.2% to 91.5 billion KRW. Nevertheless, the stock price fell 12.9% year-on-year. This is interpreted as concerns that the 2022 earnings increase was a one-time event and that earnings will decline in 2023. However, earnings are expected to increase in 2023 as well. This is because the increase in inventory assets and raw material purchases in the third quarter can be interpreted as the scale of sales recognition for 2023. Inventory assets have significantly increased to 160.9 billion KRW, compared to 44.8 billion KRW in the first quarter and 90.8 billion KRW in the second quarter. It is understood that rare gases were proactively procured through strategic cooperation with key customers.

Researcher Choi analyzed, "Although raw material purchases reached 163.8 billion KRW, considering that the cost of goods sold was only 106.9 billion KRW, a considerable amount has not yet been recognized as sales," adding, "Considering the mid- to long-term cooperative relationship with key customers and the ongoing shortage of rare gas supply, annual earnings growth is expected in 2023 as well."