The author is an analyst for NH Investment & Securities. He can be reached at jack.baek@nhqv.com -- Ed.
At HiDeep, pilot sales of touch ICs for mobile devices began in 2Q23, followed by the start of pilot sales for stylus solutions for mobile devices in 3Q23. We expect 1H24 to see the start of touch IC mass production, with stylus mass production and supply likely to commence sometime in 2H24.
Timing of stylus solution and touch IC mass production is key point
HiDeep is continuing to test its stylus solutions with customers. Currently, work to improve algorithm performance is underway, and upon completion, we expect the products to receive client approval. Mass production is likely to be confirmed within 1H24, and information regarding final customers should be verifiable through orders at that time.
At HiDeep, pilot sales of touch ICs for mobile devices began in 2Q23, followed by the start of pilot sales for stylus solutions in 3Q23. We expect mass production to kick off next year. At client companies, application of HiDeep’s stylus solutions is expected to trim costs by approximately US$30/unit compared to existing technologies. Accordingly, we believe that adoption of HiDeep’s solutions is only a matter of time, which should be followed by significant earnings growth upon the start of mass production.
Pay attention to timing of customer adoption of HiDeep’s solutions rather than 2023 earnings
HiDeep has strategically downsized its touch IC business for smartwatches this year, and as a result, overall earnings will likely arrive weak. We forecast 2023 sales of W12.5bn (-31.2% y-y) and operating loss of W5.1bn (RR y-y). In 2024, however, assuming the start of mass production of touch ICs for mobile devices in 1H24 and partial mass production of stylus solutions within 2H24, we anticipate sales of W32bn (+156.3% y-y) and OP of W1.2bn (TTP y-y). As stylus solutions carry significantly higher price tags versus touch ICs, HiDeep’s investment appeal and share price trend are likely to hinge upon the timing of customer adoption for its stylus solutions.