An employee of Daeduck Electronics, a partner of Samsung Electronics, is inspecting a PCB (Printed Circuit Board) production facility.  (provided by Samsung Electronics)

PCB makers ‘earnings surprise’ one after another in the first quarter… Will stock prices revive?

An employee of Daeduck Electronics, a partner of Samsung Electronics, is inspecting a PCB (Printed Circuit Board) production facility. (provided by Samsung Electronics)

Printed circuit board (PCB) makers are releasing ‘earning surprises’ one after another in the first quarter of this year.

According to the Financial Supervisory Service on the 5th, Simmtech’s sales and operating profit for the first quarter were 417.5 billion won and 83.9 billion won, respectively. This is an increase of 47.5% and 447.9%, respectively, compared to the same period last year.

Samsung Electro-Mechanics also achieved the highest performance in the first quarter of this year, with sales and operating profit rising by 14.2% and 15.1%, respectively, compared to the same period last year. LG Innotek also recorded a 28.7% increase in sales and 5.8% increase in operating profit compared to the same period last year, exceeding the estimates for the first quarter of the securities industry. With this in mind, the stock market is also looking forward to improving the performance of PCB companies that have not yet been announced, such as Korea Circuit and Daeduck Electronics.

The reason PCB makers record earnings surprises one after another is the expansion of the high value-added MSAP (Micro Circuit Manufacturing Method) product lineup.

Simmtech’s sales share of MSAP products such as FC-CSP, which is one of the flip-chip methods, increased by 5 percentage points to 67%. Samsung Electro-Mechanics and LG Innotek, whose earnings were expected to deteriorate due to reduced demand for smartphones, also achieved good results thanks to their package substrates. They have been aggressively investing in facilities after selecting FC-BGA, a high-performance semiconductor substrate, as their future growth engine.

The background of Samsung Electro-Mechanics’ aggressive investment in the FC-BGA market is Apple’s entry into the supply chain. Apple selected Samsung Electro-Mechanics as the substrate for the next-generation M2 chip following the M1 chip used in notebook computers. LG Innotek also announced in February that it would spend 413 billion won on FC-BGA facility investment, signaling its full-fledged entry into the market.

Kim Ji-san, head of research center at Kiwoom Securities, said, “Shipments for mobile devices decreased due to the slowdown in the Chinese smartphone market and inventory adjustments, but sales increased as shipments of industrial/electronic devices and information technology (IT) high-capacity products increased, improving product mix and increasing sales.” said.

He continued, “There is a possibility that advance purchase demand will occur from the end of the second quarter in line with the launch of the new Chinese original equipment manufacturer (OEM) model. is expected to decrease after peaking,” he added.

The fact that the stock price has already reflected concerns about the 2Q, the off-season for the electronics industry, also raises the attractiveness of PCB-related stocks. Simmtech has been on a downward trend ever since it recorded 55,100 won on April 20. On the 6th, Simmtech finished trading at 48,350 won, down 2.13% from the previous day. On the other hand, Hana Financial Investment and Shinhan Investment Corp. raised their target stock prices by 16.6% and 11.1%, respectively. This is because the current share price is undervalued compared to the improvement in the annual earnings outlook by aggressively securing long-term growth engines such as FC-BGA capacity expansion.

Securities analysts predict that PCB makers will continue to grow steadily in the second quarter and the second half, thanks to an increase in the sales portion of high value-added products. Park Kang-ho, a researcher at Daishin Securities, said, “The transition to high value-added portfolios will continue after the second quarter due to the trickle-down effect of the domestic semiconductor PCB industry and the increased proportion of MSAP product groups.” We will secure additional factors for growth profitability such as new sales growth in the market,” he said.

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