Wonik Materials (104830)

Transcription

1 Company Note July 17, 213 Wonik Materials (1483) 12M rating BUY (Maintain) 12M TP W52, from W44, Up/downside +44% Stock Data KOSPI (Jul 16, pt) 1,866 Stock price (Jul 16, KRW) 36,1 Market cap (USD mn) 198 Shares outstanding (mn) 6 52-Week high/low (KRW) 41,8/29, 6M avg. daily turnover (USD mn).5 Free float / Foreign ownership (%) 53.1/4.2 Major shareholders (%) WONIK IPS CO., LTD SinYoung Asset Management and 4 others 11.6 Performance 1M 6M 12M Absolute (%) 7..7 (5.6) Relative to KOSPI (%p) (8.3) 12MF PER trend (X) 12MF PER (LHS) price (RHS) (KRW) 6, 5, Stability, profitability and growth Attractive valuations compared to global peers, raise TP to W52, We maintain BUY and raise our TP to W52, from W44, (up 18%). Our TP equates to 15x 213 PE, a 2% discount from the average of global specialty gas peers 18.8x (Table 3). We are bullish on: 1) earnings stability and high margins on a diverse lineup of specialty gas products for the front-end process, 2) Samsung Electronics increased semiconductor and OLED investments, and 3) earnings growth with the second plant expansion in Sejong. Sales have grown at an average 24% from 28 to 212, and we expect rapid growth going forward with sales reaching W13bn in 213, W16bn in 214 and W2bn in 215. Stable sales and high margins on mass-customization specialty gas Wonik split off from Atto (currently Wonik IPS) in December 26, and has been supplying almost 1 different specialty gas products for the front-end process to major semiconductor and display producers in Korea and overseas (Samsung Electronics, Samsung Display, SK Hynix, etc.). In particular, Wonik successfully expanding its sales base, while maintaining high margins by penetrating niche markets employing a multi-product, small lot-sized production strategy. We expect Wonik to generate solid sales growth and an OPM around 2% fueled by major customers tech migration and capacity additions in Aug-8 Aug-9 Aug-1 Aug-11 Aug-12 Source: WISEfn consensus 4, 3, 2, 1, Gas demand grows as Samsung increases investments Samsung Electronics plans to accelerate investments in semiconductor memory and OLED from 2H13. Specifically, Samsung should pull forward mass production at the Xian NAND fab to early-214, increase DRAM capacity at line 16 and start OLED A3 investments following A2E. Samsung s NAND expansion should increase NO demand, and as tech migration proceeds, Si2H6 (disilane, used in semiconductor deposition) and CO2 (cleaning gas) demand should also grow. Furthermore, N2O (used in deposition) demand should also grow rapidly. Second plant ensures capacity and improves product mix Wonik Materials will start operation of a second plant in Sejong, which will raise overall sales capacity to W2bn by 215 as the new plant eases the capacity burden at the first plant in Ochang. Furthermore, the new plant should improve sales mix as Wonik Materials shifts from merchandise to products and from refinement to synthesis via GeH4 mix, N2O and NO synthesis. As such, margins should improve as margins are higher for products than merchandise and for synthesis than refinement. Won Seo wonseo@truefriend.com Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/EBITDA PB ROE Dec (W bn) (W bn) (W bn) (W bn) (won) (YoY) (W bn) (x) (x) (x) (%) 211A , A ,391 (1.5) F , F , F , Note: Net profit and EPS are based on figures attributed to controlling interest

2 Wonik Materials (1483) Table 1. Quarterly and annual earnings and estimates (W bn) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13F 3Q13F 4Q13F F 214F Sales Products Merchandise OP OP margin 23.3% 19.4% 21.9% 2.8% 16.4% 17.2% 19.8% 23.1% 21.3% 19.4% 21.4% Net profit Net margin 19.9% 17.% 18.2% 17.6% 12.2% 15.% 17.3% 19.7% 18.1% 16.4% 17.9% Note: IFRS consolidated; NP attributable to controlling shareholders.. Figure 1. Annual sales and OPM trends (W bn) Sales (LHS) OP margin (RHS) (%) F 214F 215F Figure 2. Sales breakdown by application base Figure 3. Products and merchandise breakdown AMOLED, 11% Others, 3% LED, 3% NH3 N2O Product 44% GeH4 NO Display, 16% Merchandise 55% Other products Si2H6 Semiconductor, 78% Other merchandise Note: 212 sales base Note: 212 sales base 2

3 Wonik Materials (1483) Table 2. Peer group earnings trend and outlook (W bn, %) Sales Operating profit OP margin Net profit NP margin Company F 214F F F 214F F F 214F F Wonik Materials OCI Materials Air Liquide 21,17 22,757 24,59 3,527 3,868 4, ,216 2,398 2, Linde 21,43 24,612 26,455 2,624 3,347 3, ,721 2,161 2, Air Products and Chemicals 1,294 11,38 12,129 1,643 1,733 1, ,25 1,273 1, Note: 1) Wonik Materials, OCI Materials data is KIS estimates, other company data is from Bloomberg 2) All share data is based on Jul 15 Source: Bloomberg, Korea Investment & Securities Table 3. Peer group valuation comparison (W bn, %) PE EPS growth PB ROE Company Market Cap F 214F F 214F F 214F 212 Wonik Materials (1.5) OCI Materials (55.8) (44.) Air Liquide 44, Linde 39, Air Products and Chemicals 22, (5.8) Peer group average (12.4) (8.7) Note: 1) Wonik Materials, OCI Materials data is KIS estimates, other company data is from Bloomberg 2) All share data is based on Jul 15 Source: Bloomberg, Korea Investment & Securities Figure 4. Peer group PE and EPS growth Figure 5. Peer group PB and ROE 2 (213 PER, x) Air Liquide 3. (213 PBR, x) 15 Air Products and Chemicals Linde 2.5 Air Liquide Air Products and Chemicals 1 5 Wonik Materials Linde Wonik Materials ( EPS growth, %) OCI Materials (213 ROE, %) Source: Bloomberg, Korea Investment & Securities. Source: Bloomberg, Korea Investment & Securities. Figure 6. PE trend Figure 7. PB trend (KRW) 6, Share px 7.x 9.x 11.x 13.x 15.x (KRW) 6, Share px 1.x 1.5x 2.x 2.5x 3.x 5, 5, 4, 4, 3, 3, 2, 2, 1, 1,

4 Wonik Materials (1483) Table 4. Major product line Product NH3 (Ammonia) NO (Nitric Oxide) N2O (Nitrous Oxide) GeH4 (Germanium Tetra hydride) Si2H6 (Disilane) Uses and features Used for semiconductor, LCD, solar cell and LED production - Purity: % ~ % - In semiconductor, LCD and solar cell production, NH3 is used for depositing an insulating film on silicon nitride, combined with mono-silane. - In LED production process, NH3 is used for depositing a gallium nitride(gan) film, combined with trimethyl gallium (TMGa). - Also, LED production process requires maximum purity of %. Used in semiconductor annealing process - Purity: 99.99% - Used for flash memory production process through annealing process, forming silicon oxynitrides. - Core gas of flash memory production process: contributes significantly in reliability improvements of flash memory. Used for semiconductor, LCD, AMOLED production, especially in deposition process. - Purity: % - In semiconductor, LCD and AMOLED production, N2O is used for depositing an silicon oxynitride (SiO2) film, combined with mono-silane. - Low purity of N2O is also used for medical anesthetic. Used for forming silicon-germanium film in semiconductor, LCD and thin-film solar cell. - Purity: % - Germanium (GE) is structurally similar to silicon (Si) and mainly deposited in the form of film, combined with mono-silane (SiH4). - GeH4-deposited film is similar to silicon only-used film in both structure and performance, but has excellent features in terms of preventing impurity diffusion and electrical conductivity. Used in diffusion and CVD process of semiconductor production. - Purity: % - Si2H6 is a new material, used for silicon-depositing which can not be implement through existing mono-silane (SiH4), as semiconductor device refinement is accelerating. - Compared to mono-silane (SiH4), Si2H6 shows excellent performance in terms of reaction temperature, depositing speed, roughness of the contact surface. Source: Wonik Materials, Korea Investment & Securities Company overview & Glossary Wonik Materials was spun off from Atto (currently Wonik IPS, major shareholder) in Dec 26, and has since been supplying almost 1 different specialty gas products (CVD, etching, etc.) to major semiconductor and display manufacturers in both Korea and overseas (Samsung Electronics, Hynix, etc.). Si2H6: Gas used in diffusion and CVD NO : Gas used in annealing process CVD: Diffusion process that forms insulator or conduction film at wafer substrate by making chemical reaction within two different types of gas 4

5 Wonik Materials (1483) Balance sheet FY-ending Dec. (W bn) 211A 212A 213F 214F 215F Current assets Cash & cash equivalent Accounts & other receivables Inventory Non-current assets Investment assets Tangible assets Intangible assets Total assets Current liabilities Accounts & other payables ST debt & bond 5 Current portion of LT debt 1 Non-current liabilities Debentures LT debt & financial liabilities Total liabilities Controlling interest Capital stock Capital surplus Capital adjustments Retained earnings Minority interest () () () Shareholders' equity Income statement FY-ending Dec. (W bn) 211A 212A 213F 214F 215F Sales COGS Gross profit SG&A expense Operating profit Financial income Interest income Financial expense 1 Interest expense Other non-operating profit () Gains (Losses) in associates, subsidiaries and JV Earnings before tax Income taxes Net profit Net profit of controlling interest Other comprehensive profit () () () () () Total comprehensive profit Total comprehensive profit of controlling interest EBITDA Cash flow FY-ending Dec. (W bn) 211A 212A 213F 214F 215F C/F from operating Net profit Depreciation Amortization Net incr. in W/C (3) Others C/F from investing (58) (11) (27) (34) (4) CAPEX (1) (12) (17) (18) (2) Decr. in fixed assets Incr. in investment (48) () (1) (1) (1) Net incr. in intangible assets (1) () () (1) (1) Others 1 1 (9) (14) (18) C/F from financing 4 (4) Incr. in equity 44 Incr. in debts (4) (5) Dividends Others 1 C/F from others () Increase in cash Key financial data FY-ending Dec. 211A 212A 213F 214F 215F per share data (KRW) EPS 3,789 3,391 3,486 4,673 6,37 BPS 18,757 22,38 24,668 29,33 35,355 DPS Growth (%) Sales growth OP growth NP growth EPS growth 37. (1.5) EBITDA growth Profitability (%) OP margin NP margin EBITDA margin ROA ROE Dividend yield..... Stability Net debt (W bn) (51) (64) (75) (93) (115) Debt/equity ratio (%) Valuation (X) PER PBR PSR EV/EBITDA Note: Based on K-IFRS (consolidated) 5

6 Wonik Materials (1483) Changes to recommendation and price target Company (Code) Date Recommendation Price target Wonik Materials (1483) NA BUY W62, BUY W53, BUY W44, BUY W52, 7, 6, 5, 4, 3, 2, 1, Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 6

7 Wonik Materials (1483) Guide to Korea Investment & Securities Co., Ltd. stock ratings based on absolute 12-month forward share price performance BUY: Expected to give a return of +15% or more Hold: Expected to give a return between -15% and 15% Underweight: Expected to give a return of -15% or less Korea Investment & Securities does not offer target prices for stocks with Hold or Underweight ratings. Guide to Korea Investment & Securities Co., Ltd. sector ratings for the next 12 months Overweight: Recommend increasing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Neutral: Recommend maintaining the sector s weighting in the portfolio in line with its respective weighting in the Kospi (Kosdaq) based on market capitalization. Underweight: Recommend reducing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Analyst Certification I/We, as the research analyst/analysts who prepared this report, do hereby certify that the views expressed in this research report accurately reflect my/our personal views about the subject securities and issuers discussed in this report. I/We do hereby also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Important Disclosures As of the end of the month immediately preceding the date of publication of the research report or the public appearance (or the end of the second most recent month if the publication date is less than 1 calendar days after the end of the most recent month), Korea Investment & Securities Co., Ltd., or its affiliates does not own 1% or more of any class of common equity securities of Wonik Materials. There is no actual, material conflict of interest of the research analyst or Korea Investment & Securities Co., Ltd., or its affiliates known at the time of publication of the research report or at the time of the public appearance. Korea Investment & Securities Co., Ltd., or its affiliates has not managed or co-managed a public offering of securities for Wonik Materials in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates has not received compensation for investment banking services from Wonik Materials in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates does not expect to receive or intends to seek compensation for investment banking services from Wonik Materials in the next 3 months. Korea Investment & Securities Co., Ltd., or its affiliates was not making a market in Wonik Materials s securities at the time that the research report was published. Korea Investment & Securities Co., Ltd. does not own over 1% of Wonik Materials shares as of July 16, 213. Korea Investment & Securities Co., Ltd. has not provided this report to various third parties. Neither the analysts covering these companies nor their associates own any shares of as of July 16, 213. Prepared by: Won Seo This report was written by Korea Investment & Securities Co., Ltd. to help its clients invest in securities. This material is copyrighted and may not be copied, redistributed, forwarded or altered in any way without the consent of Korea Investment & Securities Co., Ltd. This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The final investment decision is based on the client s judgment, and this report cannot be used as evidence in any legal dispute related to investment decisions. 7