Expected to See Record-high Earnings This Year
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
Innox AMC is expected to log record-high earnings this year on the back of expanding OLED shipment at clients and its strengthening market position. Set to kick off in earnest from 2H21, the delivery of foldable smartphone components also bodes well. We believe that Innox AMC’s share price remains attractive given the chances of further earnings expansion.
To log record-high earnings on expanding OLED shipment at clients and strengthening market position
Innox AMC should achieve record-high earnings this year on the back of rising OLED shipment at clients and a strengthening market position. In addition to shipment of existing products, the delivery of foldable smartphone components should soon kick off in earnest, a factor boosting the company’s mid/long-term growth prospects. Despite the recent share price improvement, we believe that Innox AMC’s shares remain attractive in light of positives such as the possibility of a further strengthening in market position and additional cost reductions.
We expect Innox AMC to see record-high earnings this year, estimating its 2021 OP at W57bn (+29.9% y-y; OPM of 13.9%) considering OLED panel shipment expansion at clients and the firm’s strengthening market presence.
In addition to shipment of its existing main products (eg, OLED materials for small/medium/large-sized panels), new delivery of dissipation sheets (to be mounted on foldable smartphones) and digitizer film (for digital pens) is to begin from 2021. Over the mid/long term, further earnings growth is anticipated on greater delivery of foldable smartphone components.
Given robust earnings and mid/long-term growth potential, valuation premium looks warranted
Innox AMC’s 1Q21 OP is estimated at a quarterly record-high of W12.9bn (+142.8% y-y; OPM of 13.5%), in line with the market projection. We mainly attribute the likely rosy result to expanding OLED shipment at clients and the firm’s strengthening market position.
Despite the recent share price growth, Innox AMC’s shares still look attractive given the possibility of further margins enhancement driven by additional strengthening of its customer base and cost savings. Of note, the firm is currently trading at a 2021E P/E of 15x, the middle of its historical valuation band. Considering Innox AMC’s expected further earnings expansion and healthy mid/long-term growth potential, we believe that a valuation premium is warranted.