Meritz Securities announced on June 22 that it expects Gigavis to benefit from an expansion in investments for ABF (Ajinomoto Build-up Film) semiconductor packaging substrates, raising its target price from 170,000 won to 190,000 won, an increase of 11.8%. The firm maintained its investment recommendation of 'Buy.'
Yang Seung-soo, a researcher at Meritz Securities, noted, "The pace of order expansion is occurring faster than our previous expectations. If we include recent orders from Chinese clients, the current order backlog is estimated to exceed 60 billion won."
Meritz Securities projects that Gigavis will report consolidated revenues of 17.7 billion won and operating profits of 4.3 billion won for the second quarter. These figures represent year-on-year increases of 98.9% and 110.0%, respectively, with operating profit surpassing market consensus by 23.8%.
Yang analyzed that demand for high-end ABF substrates is rapidly expanding beyond traditional GPU and ASIC markets to include network ICs, server CPUs, DPUs, and LPUs. He explained that the increasing complexity of production due to larger sizes, higher layers, and finer circuits is highlighting a structural supply shortage as a medium- to long-term issue.
He emphasized that this investment cycle differs from previous ones. In the past, substrate manufacturers undertook capital investments despite demand uncertainties. Currently, the shortage of substrates for AI servers could lead to shipment delays for clients, prompting them to share investment costs through subsidies or advance payments to encourage capacity expansion.
Additionally, Yang pointed out that rising production complexities are reducing the effective production capacity achievable with the same investment, thereby increasing the demand for proactive capital investments.
He anticipates that ABF substrate capital investments over the next three years will significantly exceed those during the 2021-2023 upcycle, stating, "The investment attractiveness of equipment manufacturers will be most pronounced during this capital investment cycle, which is expected to surpass market expectations."
* This article has been translated by AI.
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