[Click eStock] "KNJ, an Undervalued Beneficiary of the NAND Market"

On September 25, Korea Investment & Securities analyzed KNJ as an undervalued beneficiary of the NAND market. The firm did not provide an investment opinion or target price.

KNJ is a manufacturer of consumable semiconductor components, with its main product being CVD-SiC (Chemical Vapor Deposition Silicon Carbide) focus rings. Focus rings are consumable parts shaped like a ring that surround the edge of a wafer during the etching process. They serve to secure and protect the wafer, while also ensuring uniform plasma distribution, thereby improving process yield.

Cho Suhyeon, a researcher at Korea Investment & Securities, stated, "KNJ is the only SiC focus ring manufacturer that independently produces and operates its own CVD chambers," and added, "Compared to competitors that rely heavily on imported equipment, KNJ holds advantages in quality, lead time, and cost."

He also commented, "Focus rings are consumable parts, and equipment operation must be halted for replacement," and assessed, "Naturally, semiconductor manufacturers prefer focus rings with a relatively long replacement cycle from a total cost of ownership (TCO) perspective."

He further explained, "For memory, the adoption rate of focus rings is higher in NAND than in DRAM," and analyzed, "NAND requires hundreds of stacked layers, and the plasma etching intensity for creating vertical channels is overwhelmingly higher than for DRAM, making SiC the necessary material for stable mass production." He added, "With the recent outlook for a surge in QLC-related demand and the standardization of SiC adoption from the V8 generation, demand is expected to expand further."

Cho also analyzed that KNJ is attractive from a valuation perspective. He said, "Despite strong results driven by increased A/M (After Market, direct purchases by semiconductor manufacturers) penetration, the stock price has been sluggish," and explained, "This is because the recovery of the NAND market has been delayed, leading to deteriorating investor sentiment."

He emphasized, "Going forward, the stock price is expected to enter a full-fledged upward phase as investor sentiment improves with the recovery of the NAND market and growing interest in High Bandwidth Flash (HBF)," and added, "Despite the recent short-term rise, the price-earnings ratio (PER) remains at 9, which is still at the lower end of the band."