[Isupetasys]
[Isupetasys]

Securities firms are increasingly bullish on Isupetasys following its strong second-quarter earnings, forecasting a meaningful improvement in profitability in the second half. Analysts cite rising sales of high-margin products such as AI accelerators and switches, alongside simultaneous gains in production capacity, selling prices and product mix.

Meritz Securities on Wednesday raised its operating profit estimates for Isupetasys for this year and next, reflecting an expected expansion of production capacity in the second half and a higher share of multi-layer laminate products in the sales mix.

Isupetasys posted second-quarter sales of 379.9 billion won ($269 million) and operating profit of 77.1 billion won, up 57.4 percent and 83.3 percent, respectively, from a year earlier. Both figures beat market consensus — sales by 4.9 percent and operating profit by 2.7 percent. The outperformance was driven by stronger demand for high-value products including AI accelerators and switches, as well as a growing share of multi-layer laminate products.

Meritz Securities said the full effect of the company's second phase of capacity expansion would begin to show in the second half. It expects revenue growth from the added capacity to be accompanied by a better product mix centered on multi-layer laminate products, improved yields and higher selling prices — all of which should strengthen the company's earnings power.

Accordingly, Meritz Securities raised its operating profit estimate for Isupetasys to 348.6 billion won for this year, up 4.7 percent from its previous forecast, and to 536.3 billion won for next year, a 10.2 percent increase.

However, the brokerage lowered its target valuation multiple to 26 times from 30.9 times, reflecting share price declines at global peers. Even so, it set a fair value target of 160,000 won per share, incorporating the upward earnings revision, and said the recent share price pullback amid an earnings upgrade cycle represents a buying opportunity.

Kiwoom Securities also issued a positive outlook on Isupetasys, setting a target price of 190,000 won in a report titled "A long rest — time to rebound." The brokerage said concerns that had weighed on the stock — including fears of a market share loss at its largest customer — have been resolved, removing a key de-rating factor.

The core drivers of the earnings improvement are capacity expansion and a shift in product mix toward higher-value items. Monthly average sales at Isupetasys's main plant rose from 99.1 billion won in the first quarter to 102.7 billion won in the second quarter. Over the same period, the share of multi-layer laminate products in sales climbed from 7 percent to 11 percent, and the plant's operating margin improved from 16.6 percent to 17.8 percent.

The addition of two new large hyperscaler customers was also viewed positively. Factoring in a planned expansion of its sixth factory, Isupetasys raised its monthly sales guidance for the first quarter of next year to 155 billion won from 140 billion won.

Kwon Min-gyu, an analyst at Kiwoom Securities, said the company had "substantially eased concerns about production limits and technological capability" by reviewing the construction of a seventh factory dedicated to HDI substrates and securing dedicated HDI production capacity within the fifth factory.

"Isupetasys was left behind during the AI rally in the first half and posted the weakest share price performance in the substrate sector, but the guidance upgrade and the securing of new core order volumes have proven the strength of the industry environment and the company's unrivaled competitiveness," Kwon said. "With de-rating factors now resolved, the current share price is highly attractive from a valuation standpoint."

Daol Investment & Securities also raised its full-year operating profit forecast, expecting second-half earnings improvement to gain momentum. Analyst Kim Yeon-mi said capacity additions in the second quarter drove monthly average sales higher, from 92.1 billion won in the first quarter to 102.7 billion won in the second quarter.

Daol Investment & Securities raised its full-year operating profit estimate by 11.4 percent to 353.8 billion won from 317.5 billion won, and lifted its next-year forecast by 11.9 percent to 514.9 billion won from 460.2 billion won. The firm maintained a buy rating and a target price of 180,000 won.

Analysts broadly agree that while Isupetasys was largely sidelined during the AI-related stock rally in the first half, improved earnings visibility and the addition of new customers could serve as catalysts for a re-rating in the second half. Key risks to watch, they said, include the pace of global AI infrastructure investment, order trends from major customers, and whether yield rates stabilize as production capacity expands.


rainbow@heraldcorp.com