PI Advanced Materials, Profit Recovery Expected from Late Q1 This Year

[Asia Economy Reporter Jang Hyowon] Korea Investment & Securities analyzed on the 23rd that PI Advanced Materials' profits will recover once the inventory adjustment of component materials in the smartphone value chain is completed during the first quarter.

Kim Junghwan, a researcher at Korea Investment & Securities, stated in a report, "The estimated performance for the fourth quarter of last year is sales of 62.7 billion KRW and operating profit of 8.8 billion KRW, down 10% and 39% respectively compared to the same period last year, and operating profit is expected to fall short of the consensus of 13.5 billion KRW by 35%."

This is analyzed to be due to the inventory adjustment of materials in the smartphone supply chain. Most of the customers for FPCB and PI films for heat dissipation sheets are in the mobile sector. Sales for heat dissipation sheets in the fourth quarter of last year are estimated to have decreased by 28% compared to the previous quarter due to reduced purchases by customers caused by the production halt at Foxconn's Zhengzhou plant in China.

However, once the inventory adjustment of component materials in the smartphone value chain is completed and material demand rebounds mainly in the Greater China smartphone market, PI Advanced Materials' profit recovery is expected.

Researcher Kim said, "Since the operating rate was low and shipments were sluggish until the end of last year, the profit margin in the first quarter will still be low, but it is expected to show a stepwise recovery in profit margin starting from the first quarter," adding, "This year's estimated performance is sales of 304.1 billion KRW and operating profit of 58.6 billion KRW, which is expected to be similar to the record-high sales in 2021."

Additionally, Researcher Kim analyzed, "The stock price is expected to rebound from the end of the first quarter to early second quarter when the smartphone component material industry begins to recover," and "Although the target price-to-earnings ratio (PER) has been lowered, the reason it can still receive a higher multiple compared to other IT material companies is that it has succeeded in diversifying products into PI for EV, foldable, and COF, and can increase profits and profit margins annually through expansions."