Semiconductor Packaging and Test Service Provider

The authors are analysts of Shinhan Investment Corp. They can be reached at sungjun.na@shinhan.com and doyeon@shinhan.com, respectively. -- Ed.

 

Hana Micron provides packaging and test services for memory and non-memory semiconductors. The company generates a similar portion of sales from services offered for memory and non-memory chips, with a large focus on chips used in mobile applications. Subsidiaries include silicon parts maker Hana Materials (32.75% stake) and Brazil-based HT Micron Semicondutores (66.59%).

Packaging volume to grow on recovery in downstream demand

In 2021, Hana Micron stands to see growth in packaging volume on recovery in downstream demand. Visible growth is expected from the low base of 2020 caused by sluggish mobile demand. Newly added sales from server DRAM packaging for Samsung Electronics (started in 2Q20) should add a boost going forward, with flip-chip packaging for server chips carrying higher margins than packaging provided for mobile chips. Meanwhile, margins from fingerprint sensor packaging is improving alongside the increase in capacity utilization rates at the company's Vietnam plant.

Non-memory test business to continue on a growth track

Outsourcing demand for packaging and test services is set to grow in the non-memory market. Hana Micron currently generates just 10% of sales from non-memory test services, but should see that portion increase going forward with orders flowing in from Samsung Electronics since 3Q20 and capacity utilization rates now exceeding 70%. Given the upbeat outlook for mobile demand in 2021, we expect Hana Micron to enjoy growth in test volume for RF, mobile AP, power management IC (PMIC), and touch IC chips going forward.

Solid earnings growth to justify high share valuations

For 2021, Hana Micron is forecast to report consolidated operating profit of KRW93bn (+69.5% YoY) on sales of KRW661.8bn (+25.2% YoY) backed by the recovery in downstream demand. Driven by business and client diversification vs. 2013, overall earnings are expected to continue on a steady growth track. Market concerns are currently rising over valuations, with shares now trading above the historical high at a 2021F PBR of 2.2x on upbeat expectations for a rebound in market conditions. Considering improvements seen in earnings volatility and debt ratio, we believe Hana Micron shares deserve to trade at higher valuations than in the past.

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