Despite Strike-Driven Q3 Earnings Shock, LEENO Industrial Target Price Raised to KRW 100,000—DS

[Financial News] DS Investment & Securities raised LEENO Industrial's target price by 29.9% from KRW 77,000 to KRW 100,000, factoring in the company's expected normalization in the fourth quarter and the growth potential of next-generation semiconductor test sockets despite weak third-quarter earnings. It maintained its Buy rating.
Surim Lee, equity research analyst at DS Investment & Securities, explained on the 6th, "We believe concerns that the full-scale strike in July would hurt third-quarter earnings have already been largely reflected in the stock price. The strike has ended, and the company plans to make every effort to meet its existing full-year earnings forecast by increasing production and shipments in the fourth quarter."
Third-quarter revenue is projected to fall 41.2% from the previous quarter to KRW 84.2 billion, while operating profit is expected to decline 46.2% to KRW 39.6 billion. In the fourth quarter, however, revenue and operating profit are forecast to recover, rising 18.9% and 16.9%, respectively, to KRW 100.1 billion and KRW 46.2 billion.
Annual earnings are also expected to continue growing. Revenue this year is projected at KRW 427.2 billion, up 14.7% from the previous year, while operating profit is forecast to rise 16.7% to KRW 206.6 billion. Next year, revenue and operating profit are expected to increase 18.1% and 18.2%, respectively, to KRW 504.8 billion and KRW 244.3 billion. The operating margin is expected to remain in the 48% range in both years.
Demand for application processor (AP) test sockets from North American smartphone customers is also expected to remain solid. Surim Lee said, "The application of wafer-level multichip modules (WMCM) continues to expand as the transition to 2nm ramps up. North American AP customers are also believed to have begun research and development on 2nm processes, so it is worth watching for the possibility of expanding the scope of applications with customers next year."
As a medium- to long-term growth driver, the analysis identified co-packaged optics (CPO), which combines optical components and semiconductors in a single package. If CPO adoption spreads, a new test market for "optical engine chips" would emerge in addition to the existing GPU and HBM markets.
Surim Lee said, "Optical engine chips require ultra-fine pitches, low resistance, and precise current and voltage control, making pogo-pin-based ultra-fine-pitch technology important. We believe LEENO Industrial is effectively the only company currently capable of producing test sockets for optical engines at this level."
Surim Lee added, "Although short-term revenue contribution is limited because the full-scale mass-production market has yet to open, what matters is that the company has secured a preemptive position in the optical-engine testing market emerging as CPO adoption expands."  

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