[Click eStock] "Seoul Semiconductor Needs New Growth Engine to Drive Top-Line Expansion... Target Price Down"

Target Price Downgraded from 16,000 Won to 14,000 Won

Hana Securities on the 30th lowered the target price for Seoul Semiconductor from 16,000 KRW to 14,000 KRW, stating that new growth drivers are needed to lead external growth. The investment rating was maintained as 'Buy.'

Kim Rok-ho, a researcher at Hana Securities, explained, "We have lowered the book value per share (BPS) for 2024 and 2025 by 4% and 6%, respectively, and also lowered the target price due to the increased weight of BPS in 2025. Although sales to the automotive sector have steadily increased, reaching a 30% share of total sales, which is positive, new drivers are needed to lead overall external growth."

Seoul Semiconductor recorded sales of 283 billion KRW in the second quarter of this year, an 11% increase compared to the same period last year, and operating profit turned positive at 4 billion KRW. Researcher Kim said, "This performance exceeded consensus (average securities firm forecasts) and marked a return to profitability after two years. Sales to the IT and automotive sectors were favorable, with TV demand increasing within IT due to the effect of sports events. Additionally, the automotive sector maintained a solid trend, mainly in exterior lighting." He added, "Compared to the third quarter of 2023, which had similar sales of 282 billion KRW but recorded an operating loss of 13.4 billion KRW, this result confirms improvements in cost and expense reductions. The expansion of the automotive sales ratio likely contributed to the mix improvement effect."

The profit trend is expected to continue in the second half of the year. Hana Securities estimates Seoul Semiconductor's third-quarter results at sales of 292.3 billion KRW and operating profit of 7 billion KRW. Researcher Kim said, "The sector expected to drive external growth is the automotive sector, which could also improve profitability compared to the previous quarter. Domestic and international customer sales of Wicop are ramping up, and since it is adopted in relatively high-priced models, the increase in automotive sales is expected to positively impact profit margins."

However, it is still difficult to expect a full-scale recovery in performance. Researcher Kim said, "The overall industry environment is not conducive to significantly growing sales volume, so it is difficult to expect a substantial increase and recovery in performance."