[Click e-Stock] "Haesung DS Enters Full-Fledged Earnings Recovery... Investment Opinion and Target Price Raised"

Investment Rating Upgraded from 'Neutral' to 'Buy'
Target Price Raised by 37.5% from Previous Level

On September 29, Meritz Securities announced that it has upgraded its investment opinion on Haesung DS from 'Neutral' to 'Buy,' and raised its target price from 24,000 won to 33,000 won, citing the company's entry into a full-fledged earnings recovery phase.

Yang Seungsu, a researcher at Meritz Securities, stated, "Haesung DS has entered a full-fledged earnings recovery phase, driven by stable lead frame sales and growth in DDR5." He added, "Additionally, since Haesung DS's stock price has significantly underperformed its peers this year due to a legacy-focused portfolio, this is also a time when a valuation rerating based on expanded DDR5 sales can be expected."

Meritz Securities estimates Haesung DS's third-quarter sales this year at 173 billion won, up 15.8% year-on-year, and operating profit at 14.2 billion won, up 21.0%. These figures exceed the consensus (average securities firm forecasts) by 2.1% and 11.3%, respectively. Researcher Yang commented, "A steep rebound in DDR5 sales is expected, following the resumption of deliveries to domestic clients in the second quarter." He continued, "It appears that supply volumes to domestic clients' factories in China and major OSAT (Outsourced Semiconductor Assembly and Test) companies have increased significantly." He also added, "Lead frames are expected to maintain stable growth, supported by increased volumes for European electric vehicles and new clients."

DDR5 sales growth is expected to accelerate from the third quarter as a turning point. Haesung DS's reel-to-reel production method offers advantages in mass production compared to competitors' sheet methods, but it is difficult to secure initial yield in the high-rise substrate manufacturing process. Researcher Yang explained, "For this reason, Haesung DS experienced a prolonged slump in performance due to delays in transitioning from DDR4 to DDR5, unlike other substrate manufacturers. However, if the company succeeds in entering the market stably, it can rapidly expand its market share based on overwhelming cost competitiveness." He further analyzed, "In this context, the fact that Haesung DS's DDR5 sales have recovered for two consecutive quarters is a meaningful change. As stable DDR5 production and supply capabilities have been confirmed, it is highly likely that quarterly shipment increases will accelerate going forward." Based on Haesung DS's cost competitiveness and rapid market penetration, Meritz Securities forecasts that DDR5 sales in 2026 will reach 114.3 billion won, up 107.8% year-on-year.