[Click e-Stock] "PI Advanced Materials: Second-Half Performance Momentum Limited by Client Inventory Burdens"

Kiwoom Securities Lowers Target Price
Performance Momentum Expected to Be Limited Due to Client Inventory Burdens
Ultra-Thin Film Demand for Foldable iPhones Seen as Potential Share Price Driver

On July 30, Kiwoom Securities stated regarding PI Advanced Materials, "Due to inventory burdens at client companies, performance momentum in the second half of the year is expected to be limited," and lowered its target price to 28,000 won. The investment opinion was maintained as 'Buy'.

Kiwoom Securities projected that PI Advanced Materials' third-quarter results would show sales of 68 billion won, representing a 6% decrease compared to the previous quarter and a 4% decrease year-on-year. Operating profit is expected to be 10.8 billion won, a sharp decline of 33% from the previous quarter and an 11% decrease year-on-year, falling short of the market consensus of 15.5 billion won. The operating profit margin is estimated at 15.8%. Analyst Kim Sowon explained, "Due to the effect of front-loaded shipments reflected in the first half and inventory burdens at client companies, a high-first-half, low-second-half performance trend is expected this year. The utilization rate is expected to fall from 69% in the second quarter to around 60% in the third quarter, and as a result, the expansion of operating losses will cause profitability to fall short of expectations."

However, expectations for increased benefits from ultra-thin films, such as those used in foldable iPhones, are expected to act as a share price momentum. She added, "Some models of the iPhone 17 are scheduled to be equipped with ultra-thin PI film, which has an average selling price about 40% higher than conventional black PI film. The resulting product mix improvement is expected to partially offset the impact of inventory adjustments."

Meanwhile, in the second quarter, PI Advanced Materials recorded sales of 72.5 billion won, an increase of 13% from the previous quarter but a decrease of 2% year-on-year. Operating profit was 16.2 billion won, a significant increase of 82% from the previous quarter but a 9% decrease year-on-year, falling 9% short of the market consensus of 17.8 billion won. The operating profit margin stood at 22.3%.

Regarding this, Analyst Kim cited the slowdown in the effect of front-loaded shipments due to the decline in the won-dollar exchange rate and tariff issues as reasons for the weak performance. She explained, "The proportion of products for thermal interface sheets rose to 37%, up 9 percentage points from the previous quarter and 6 percentage points year-on-year, which worsened the product mix. Accordingly, the blended average selling price (ASP) is estimated to have fallen by 5% compared to the previous quarter. Due to the effect of front-loaded shipments, client inventories increased, and some inventory adjustment movements have been observed since the end of the second quarter."