[Click e-Stock] "TES Earnings Upgraded on Expansion of Advanced Process Equipment... Target Price Raised"

On August 19, Hana Securities maintained its "Buy" investment rating on TES, stating, "Profitability improvements driven by the expansion of equipment supply for advanced processes remain a sustainable fundamental factor going forward." The firm also raised its target price to 45,000 won, up from its previous estimate.

In the second quarter of this year, TES recorded sales of 82.1 billion won, marking a 36% increase year-on-year, while operating profit surged 104% to 20.4 billion won. These results exceeded estimates by 19% for sales and 101% for operating profit.

Kim Rokho, a research analyst at Hana Securities, commented, "The strong sales performance was mainly due to robust demand for CVD equipment from overseas clients and Samsung Electronics' investment in NAND conversion." He added, "The significant upside in operating profit was primarily driven by an improved product mix, resulting from the expansion of high-margin overseas orders and advanced process equipment." However, he pointed out that while profitability from overseas clients remains solid, volatility and uncertainty persist, limiting quarterly visibility. Nevertheless, he analyzed, "As the proportion of TES's core equipment continues to expand into advanced processes, this will lead to a structural trend of profit improvement."

Regarding the performance outlook for the second half of the year, Kim said, "While the third quarter is expected to slow compared to the first and second quarters, a rebound is anticipated in the fourth quarter." He explained, "Although there may be variables related to Samsung Electronics' P4 investment, solid results are likely in the fourth quarter due to SK Hynix's investment activities." He further projected, "The rise in average selling price (ASP) and profitability, resulting from the supply of advanced process equipment, is likely to continue."

Kim also noted, "TES stands to benefit from SK Hynix's DRAM 1b-nano and Samsung Electronics' 1c-nano new investments, as well as NAND conversion investments. This creates a stable order environment with minimal gaps, which in turn secures earnings stability." He concluded by reiterating TES as his top pick among small- and mid-cap stocks.