[Click eStock] "DB HiTek, Beneficiary of China's 'Yiguhuanxin'"

Target Price Raised from 43,000 KRW to 51,000 KRW

DS Investment & Securities has raised the target price for DB HiTek from 43,000 KRW to 51,000 KRW, forecasting that the factory operating rate will continue to rise in the first half of this year due to the effect of China's 'Igu Hwan Shin' policy. The investment rating was maintained at 'Buy.'

Researcher Lee Surim of DS Investment & Securities estimated DB HiTek's sales in the first quarter of this year at 339.6 billion KRW (up 30% year-on-year) and operating profit at 75.4 billion KRW (up 84% year-on-year). Lee noted, "The company's operating rate rose from 69% in the fourth quarter of last year to over 85% in the first quarter of this year, supported by the replacement cycle of home appliances and automobiles based on China's Igu Hwan Shin policy," adding that the operating rate continues to increase as we enter the second quarter.

Igu Hwan Shin means replacing old items with new ones and is a Chinese government domestic demand activation policy that provides subsidies when consumers replace old consumer goods with new products.

Lee explained, "As China's semiconductor mass production internalization trend expands, adoption of the company's foundry services is increasing," adding, "Texas Instruments (TI), which has a high market share in automotive semiconductors in China, has recently become the subject of an anti-dumping investigation by China's Ministry of Commerce, increasing the need for localization of automotive semiconductors in China." It is also analyzed that local foundry company SMIC is prioritizing advanced processes, so there is a need for companies that can meet legacy demand such as small and medium-sized analog, power semiconductors, and display driver ICs (DDI) from Chinese fabless semiconductor companies.

However, a loss of about 13 billion KRW is expected in this year's consolidated results. Lee said, "Due to the absorption merger of DB Metal by the consolidated subsidiary DB World, DB Metal's operating loss will be reflected in the consolidated results from July," but he noted, "Even considering the loss-making subsidiary merger, the company's profit is expected to grow 17% year-on-year, highlighting that the company's turnaround momentum remains valid."