20170531-三星证券-Supply_chain_to_rerate_as_SEC_builds_new_facilities_27页_961kb

Sector Update Summary

Core Content

This report provides an analysis of Samsung Electronics' (SEC) semiconductor investments and their implications for the supply chain, focusing on equipment and materials suppliers. It outlines the company's aggressive expansion plans, including the construction of new fabrication facilities, and highlights the potential for rerating across the industry. The report also evaluates specific stocks and their financial forecasts.

Main Points

1. SEC's Semiconductor Investments

• Samsung Electronics plans to invest around KRW25 trillion in 2017, a record-high amount and significantly more than its post-2010 annual range of KRW10t-15t.
• The company is breaking ground on three new fabs simultaneously, including one in Xian and one in Pyeongtaek.
• These investments are driven by solid demand outlook, high price elasticity of demand for NAND, and limited space for NAND capacity expansion after 2018.
• The construction of new facilities is expected to trigger reratings in the semiconductor supply chain.

2. NAND Market Outlook

• NAND prices are expected to remain strong due to tight supply, but price elasticity could lead to a decline in demand if prices rise sharply.
• The NAND market is anticipated to remain vibrant through end-2019, as long-term growth potential is realized.
• Major clients are increasing NAND content in their products, suggesting strong demand for 3D NAND.

3. Equipment and Materials Suppliers

Equipment Suppliers

• The report highlights Wonik IPS and TES as top picks, with SK Materials and Hansol Chemical also showing potential.
• Wonik IPS is expected to benefit significantly from SEC's 3D NAND expansion, with a target price of KRW36,000 and a revised P/E multiple to 15x.
• TES has a target price of KRW35,000 and a revised P/E multiple to 15x.
• The report forecasts increased capacity for 3D NAND production, with SEC adding 110,000 wafers in 2017.
• Equipment maker shares are expected to rise due to the start of construction and long-term growth expectations.

Materials Suppliers

• SK Materials and Hansol Chemical are highlighted as potential beneficiaries of the capacity expansion.
• The target P/E multiple for materials suppliers is raised from 12x to 15x.
• SK Materials is expected to have a target price of KRW230,000, based on 17x forward P/E.
• Hansol Chemical has a target price of KRW95,000, due to downstream TV business weakness, but BUY recommendation is maintained.
• The report suggests that materials shares will benefit from improving sentiment and increased production.

Key Information

1. Investment Strategy

• The construction of new fabs is a key catalyst for equipment manufacturers.
• The start of construction is seen as a signal of long-term growth and solid demand.
• Cleanroom construction is expected to be completed earlier than anticipated, which will allow for flexible fab management.

2. Fab Construction Roadmap

• Pyeongtaek Fab #1 and Xian #1 are key projects for 3D NAND expansion.
• Pyeongtaek is expected to accommodate 300,000 wafers/month, but space will be limited by 2018.
• New fab construction is anticipated to begin in 2H17 to meet capacity targets by 2019.

3. Market Outlook

• Equipment and materials suppliers are expected to benefit from SEC's investment cycle.
• The market has become more sensitive to SK Hynix shares than to SEC's.
• P/E multiples are expected to increase due to increased demand and growth expectations.

4. Stock Recommendations

• Wonik IPS and SK Materials are BUY recommendations with target prices of KRW36,000 and KRW230,000, respectively.
• Hansol Chemical is BUY but with a revised target price of KRW95,000 due to TV business concerns.
• Equipment and materials stocks are expected to move in sync with SEC's capex and industry conditions.

Summary of Financial Forecasts

Wonik IPS

• 2017E Sales: KRW590.2b
• 2017E Operating Profit: KRW128.9b
• 2017E EPS: KRW2,427
• Target P/E: 15x
• Target Price: KRW36,000
• Upside: 27.2% from current price (KRW28,300)

SK Materials

• 2017E Sales: KRW1,168.0b
• 2017E Net Profit (adj): KRW100b
• 2017E EPS (adj): KRW2,427
• Target P/E: 17x
• Target Price: KRW230,000
• Upside: 15.5% from current price (KRW190,500)

Hansol Chemical

• 2017E Sales: KRW865.21b
• 2017E Net Profit (adj): KRW24.9b
• 2017E EPS (adj): KRW2,427
• Target P/E: 15x
• Target Price: KRW95,000
• Upside: 24.1% from current price (KRW76,600)

Conclusion

The report emphasizes the positive outlook for the semiconductor supply chain due to SEC's aggressive investment strategy. It highlights the potential for rerating in both equipment and materials suppliers and provides target prices and P/E multiples for key stocks. Investors are advised to consider long-term growth and capacity expansion as key factors in their decision-making process.