[Click e-Stock] "Schem's Eco-Friendly Refining Business Surges... Profit Turnaround Expected"

On August 25, Meritz Securities evaluated Schem, stating, "The visibility of performance improvement has increased as the eco-friendly refining business enters a full-fledged growth phase." Although no specific investment opinion was provided, the analysis suggests that Schem's sales are expected to surge and profitability to improve, driven by rising demand from OLED (organic light-emitting diode) panel manufacturers for cost reduction.

Yang Seungsoo, a researcher at Meritz Securities, said on this day, "Schem's eco-friendly refining business is leading a paradigm shift in the display industry. Overall, the company is likely to turn profitable from the third quarter," he stated.

OLED materials are essential consumable components that make up the pixels in displays, and because the holes in the fine metal mask (FMM) are extremely small, more than 80% of the total material misses its target during the coating process. In the past, most of the material coated elsewhere was treated as waste or loss, but recently, as panel manufacturers increasingly seek to reduce costs, the recovery and recycling of these materials through eco-friendly refining companies is rapidly increasing.

Researcher Yang said, "Schem plans to expand the number of refined and recycled items it supplies from 18 this year to 28 next year and over 30 by 2027." He added, "The reuse rate per material item is also steadily rising, so sales from the eco-friendly refining business are expected to soar from about 8.5 billion won this year to 25 billion won next year." He further explained, "Given the structural characteristic of having no burden of raw material purchases, a sharp improvement in profitability is also expected as sales from the eco-friendly refining business expand."

For the first half of the year, sales amounted to 9 billion won, down 44% from the same period last year, and the company posted an operating loss of 570 million won, significantly underperforming expectations. This was due to a sharp decline in OLED compound sales to existing display material customers, as the company sought to expand supply to global display panel clients.

Researcher Yang stated, "Next year, when the eco-friendly refining business grows in earnest, sales are expected to reach 50.8 billion won (up 48.1% year-on-year) and operating profit 9.5 billion won (up 562.9% year-on-year), representing rapid performance growth." He added, "Given the high visibility for future performance improvement and the growth potential of the eco-friendly refining business, the current stock price offers strong investment appeal."