[Click e-Stock] "Wonik QnC, Impact of Momentive's Poor Performance... Target Price Lowered"

On August 21, Hanwha Investment & Securities stated regarding Wonik QnC, "We are revising down our earnings estimates for this year due to the decline in Momentive's profit margin," while maintaining a 'Buy' investment rating and lowering the target price from 33,000 won to 24,000 won.

Kim Kwangjin, a researcher at Hanwha Investment & Securities, said, "Although there will be some improvement in the second half compared to the first half, given that the recovery in electric vehicle demand is not clearly visible, it will be difficult to achieve profit improvement sufficient to offset the poor performance in the first half."

Wonik QnC's cumulative operating profit for the first half of this year was 33.1 billion won, which fell far short of the previous estimate of 66.5 billion won. Researcher Kim explained, "The quartz division showed growth due to expanded supply to Samsung Electronics and TSMC, but Momentive's poor performance was more severe than expected, resulting in operating profit falling significantly short of expectations." He analyzed, "The cause of Momentive's weak performance was a decline in ceramic powder sales due to sluggish conditions in the electric vehicle market." Since ceramic powder for automotive semiconductors is the most profitable product line, it directly impacted the profit margin decline. He added, "Momentive's consolidated operating profit margin in the first half was about 2%, which is a significant drop considering that it has consistently maintained around 10% since 2022."

Accordingly, this year's earnings forecast has been lowered to sales of 944.1 billion won (up 6% year-on-year) and operating profit of 73.7 billion won (down 19% year-on-year). This is a significant downward revision compared to the previous estimates of 967.2 billion won in sales and 120.3 billion won in operating profit.

However, the growth momentum of the quartz division is still considered valid. He analyzed, "The investment effect of Samsung Electronics' DRAM 1c conversion will be reflected, and in the case of TSMC, growth will continue as it gradually replaces the volume of Japanese competitors," adding, "Since the diffusion process is mainly manual, there are limits to rapid volume expansion, but achieving about 20 billion won in sales this year is possible."

Regarding the target price, Researcher Kim commented, "The current share price already reflects some of this year's poor performance, so there is no significant downside risk," but added, "Given the strength of the improvement expected in the second half, there is a lack of catalysts for an immediate share price increase, so investors will need to wait."