"Has Lotte Chemical Passed the 'Bottom' After 10 Quarters of Profit?" ... Daeduck Electronics to Expand Capacity by 213 Billion Won as Memory Substrate Plants Run at Full Capacity [Stocktopia]

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[The Financial News] Here is a roundup of major brokerage reports as of the morning of May 12.
After Lotte Chemical returned to profit for the first time in 10 quarters, brokerages raised their target prices in unison. Analysts also said the company is likely to keep its base materials division in the black through the third quarter.
S-OIL posted strong first-quarter results on robust refining margins, but future earnings will hinge largely on when the oil price cap ends. Daeduck Electronics, a semiconductor substrate maker, has decided to invest 213 billion won to expand capacity after utilization of its memory package substrate lines reached full capacity and shortages worsened.
\r\n\r\n◆Lotte Chemical (011170)― Korea Investment & Securities Co., Ltd. / Analyst Lee Chung-jae
- Target price: 130,000 won (raised from 110,000 won) | Previous close: 106,500 won
- Investment rating: Buy
Korea Investment & Securities Co., Ltd. raised its target price for Lotte Chemical to 130,000 won, citing the company's return to profit after 10 quarters.
Operating profit of 73.5 billion won in the first quarter was a surprise, given that the market consensus had called for a loss of 20.3 billion won.
Supply glut from capacity expansions in China and the Middle East had weighed on the company's performance. However, analysts said higher product prices stemming from the war between the United States and Iran, together with improved spreads from low-cost raw material input, helped the company move out of the red.
Analyst Lee Chung-jae said, "Rising oil prices due to the Iran war and uncertainty over downstream demand remain concerns, but if the current trend continues, the base materials division is likely to stay profitable through the third quarter."
\r\n\r\n◆S-OIL (010950)― Mirae Asset Securities / Analyst Jinho Lee
- Target price: 135,000 won (raised from 120,000 won) | Previous close: 110,900 won
- Investment rating: Buy (maintained)
Mirae Asset Securities raised its target price for S-OIL to 135,000 won, saying earnings forecasts were revised upward on the back of strong refining margins.
Analyst Jinho Lee said, "The supply shortage caused by the blockade of the Strait of Hormuz drove up prices across crude oil and petroleum products." He added, "Even after the war ends, it is expected to take more than three months for the market to normalize, so price strength is likely to continue in the second half."
Second-quarter operating profit is estimated to fall 60% from the previous quarter, reflecting opportunity losses from the oil price cap and a sharp rise in Saudi Arabia's official selling price of crude oil (OSP).
The analyst said, "Depending on the confirmed details, third- and fourth-quarter results could swing significantly in either direction," and identified the timing of the oil price cap's end and the scale of compensation for losses as the biggest risks.※ Refining marginThis refers to the amount left after subtracting crude oil purchase costs and refining expenses from the selling price of petroleum products. It is a key indicator used to gauge the profitability of refiners.
\r\n\r\n◆Daeduck Electronics (008060)― NH Investment & Securities / Analyst Hwang Ji-hyun
- Target price: 180,000 won (raised from 150,000 won) | Previous close: 125,800 won
- Investment rating: Buy (maintained)
NH Investment & Securities raised its target price for Daeduck Electronics to 180,000 won, saying the company's 213 billion won investment to expand its memory package substrate plant would have a positive impact on the stock.
Analyst Hwang Ji-hyun said, "Since the second half of last year, utilization at Daeduck Electronics' memory package substrate lines had already exceeded 90%, putting them at full capacity." She added, "In the first quarter, the company converted some memory lines to the more profitable Flip Chip Chip Scale Package (FC-CSP), which further deepened the shortage of memory package substrates."
Taking into account the site size and competitors' idle capacity, memory package substrate production capacity is expected to expand by a conservative 30% from the current level. Full-scale operations are projected to begin in the third quarter of next year.※ Memory package substrateThis is a small circuit board that connects memory semiconductor chips such as DRAM to the motherboard. Because the chips are built with circuits thinner than a human hair and cannot be connected directly to the motherboard, the substrate serves as a bridge and is an essential component in semiconductor products.※ FC-CSP (Flip Chip Chip Scale Package)This is a miniature package in which a semiconductor chip is flipped over and attached directly to the substrate. It is smaller than conventional packages and offers faster electrical transmission, making it widely used in chips that require compact size and high speed, such as smartphone APs and mobile DRAM.※ ShortageThis industry term refers to a situation in which demand outpaces supply. When shortages occur, manufacturers often respond by raising prices or expanding capacity, so the condition is generally positive for the earnings of the relevant component maker.
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sms@fnnews.com Sung Min-seo Reporter