No. 2 Player in Domestic Non-memory Post-fab Test Market
The author is an analyst of NH Investment & Securities. He can be reached at kyeongkeun.kang@nhqv.com. -- Ed.
The domestic non-memory post-fab test market is entering a period of structural growth. Thanks to its turn-key solutions and advanced package technology, Nepes Ark is likely to see increased test volume. We also expect the firm to see greater sales diversification on the addition of new tests fields and securing of large global clients.
Non-memory post process test market enters period of structural growth
Nepes Ark is a non-memory post-fab test company. The domestic non-memory post-fab test market is entering a period of structural growth thanks to the expansion of Samsung Electronics’ non-memory investment and government policy support. Non-memory post-fab test cost is calculated as ‘unit price per equipment hour x test time by wafer’. We note that test volume is increasing thanks to the strong domestic foundry market, and test time is rising on the integration of semiconductors for AI and 5G.
Group turn-key solution + advanced package technology = test volume expansion
As of 2019, Nepes Ark ranked second in the domestic non-memory post-fab test market, with a market share of 18.6%. The company is able to secure stable test volume by providing turn-key solutions (package & test) through the package companies Nepes (parent company) and Nepes Lawe (affiliate). Also, as the Nepes Group has the only fan-out (WLP, PLP) package technology in Korea, Nepes Ark is expected to see increased domestic non-memory test orders going forward.
Following large capex of W109.8bn in 2019, the firm plans to invest W130.0bn this year. Accordingly, its test equipment lineup should expand from 170 units in 2019 to 240 units in 2020. We forecast 2020 sales of W70.5bn (+28.8% y-y) and OP of W11.5bn (-37.1% y-y; OPM of 16.2%). In 2021, the company should see high top-line growth and profitability improvement, with sales of W134.8bn (+91.3% y-y) and OP of W38.4bn (+235.3% y-y; OPM of 28.5%), backed by capacity expansion effects and the securing of fan-out PLP tests orders from large US fabless players.
The firm’s IPO price of W23,400~26,500 is equivalent to a 2021 P/E of 10.4~11.8x. In the future, growth momentum is expected via product diversification (from PMIC to SoC and DDIC fields) and the securing of large global clients.