[Click eStock] "Daeduck Electronics, End of Downtrend... Focus on the Slope of Rebound"

Hi Investment & Securities maintained its investment opinion of ‘Buy’ and target price of 29,000 KRW for Daeduck Electronics on the 17th.

Hi Investment & Securities forecasted Daeduck Electronics’ operating profit margin at 9.4% for this year. Considering that the company views the sustainable operating profit margin of its semiconductor substrate business to be between 11% and 15%, it is judged that the performance expectations have been realized. In fact, the long-term average operating profit margin of major semiconductor substrate companies is also around 10%. Even if there are additional adjustments due to short-term market conditions, the extent is expected to be more gradual compared to the steep decline over the past six months.

The FC-BGA (Flip Chip Ball Grid Array) sales plan for this year, which was 400 billion KRW at the beginning of the year, has been revised downward to 320 to 340 billion KRW. This is because, although the automotive sector, which accounts for 50%, remains relatively solid, demand for other applications such as smart TVs and controllers is sluggish.

Nevertheless, there is no change in the mid- to long-term investment plan. The current annual FC-BGA capacity of 450 billion KRW is expected to expand to 700 billion KRW by 2025. This is to respond not only to the existing core automotive sector but also to CPU and, in the mid- to long-term, server-grade applications. Daeduck Electronics is currently supplying paid samples for CPU-grade FC-BGA and plans to support server-grade FC-BGA by the end of this year.

Go Eui-young, a researcher at Hi Investment & Securities, said, “Daeduck Electronics cautiously mentioned an improvement in semiconductor substrate logistics in June, but this is a base effect resulting from the steep inventory adjustments since last November. While the direction of improvement is correct, it is difficult to gauge the extent and sustainability.” He added, “However, considering that May was the worst period and the low point of Daeduck Electronics’ sales growth rate is estimated to be in the second quarter, the trend of stock price decline over the past year is believed to be nearing its end.”

Researcher Go also added, “Now is the time to consider the timing and slope of a rebound rather than worrying about the possibility of further stock price declines.”