98412 112912 2022

The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. — Ed. 

In response to the economic slowdown, memory chipmakers are expected to significantly reduce capex in 2023. Semicon equipment makers are predicted to see full-fledged earnings improvement in 2H23.

Memory semicon capex to decline in 2023 due to economic slowdown

We maintain a Hold rating on Wonik IPS and lower our TP from W41,000 to W32,000 as we slash our 2022 and 2023 OP estimates from W169.7bn and W203.5bn, respectively, to W142.4bn and W180.2bn, due to delays and declines in client semicon investment. Our TP is calculated based on COE of 8.5% and 3-year forward ROE of 12.4%.

Semicon equipment orders and sales momentum are expected to be limited until 2023. Wonik IPS’s major customers, Samsung Electronics (SEC) and SK Hynix, plan to conservatively invest in memory in 2023 due to the deteriorated global economic environment, including interest rate hikes. Micron also noted that its FY2023 capex will decrease significantly y-y. As a result, earnings momentum for companies with a high exposure to memory chipmakers, such as Wonik IPS, appears limited.

Another negative is that competition is intensifying among producers of PECVD equipment, Wonik IPS’s flagship product. Competitor AMAT is strengthening sales through customized products for domestic customers. Lam Research, which focuses on etching equipment, is also active in expanding its CVD portfolio to secure next-generation growth engines.

Full-fledged earnings growth expected in 2H23

Wonik recorded 2Q22 sales of W199.8bn (-4% q-q) and OP of W18.5bn (-16% q-q), falling far short of consensus. In response to deteriorating memory supply-demand conditions, SEC’s P3 equipment orders have been delayed. Mass production at the P3 facility is now likely to start in early 2023.

We expect Wonik’s earnings to improve q-q in 3Q22, reflecting deferred sales. In detail, we forecast sales of W337.1bn (+69% q-q) and OP of W61.6bn (+233% q-q). The firm’s earnings should improve in earnest in 2H23, when memory supply-demand is likely to improve and chipmakers are expected to aggressively expand capex.


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