NH Investment & Securities announced on June 25 that it expects Simtech to see significant profitability improvements due to the expansion of SOCAMM2 (server memory module) production and price increases. The firm raised its target price for Simtech from 120,000 won to 150,000 won, a 25% increase, while maintaining a 'buy' rating.
Analyst Hwang Ji-hyun stated, "Production volumes for SOCAMM2-related substrates are steadily increasing, and we anticipate a significant improvement in the product mix as a result. Starting in 2027, high-margin substrates for LPDDR6 will also begin mass production."
Hwang cited the expansion of SOCAMM2 production, a reduction in the share of low-margin tenting substrates, and the profitability improvements from LPDDR6 substrate production as reasons for the target price increase. He noted that recent price increases across the semiconductor substrate industry would further strengthen performance growth.
Looking ahead to the second half of the year, Hwang expects that the full-scale production of SOCAMM2 will lead to more pronounced profitability improvements due to changes in product composition. He also suggested the possibility of expanding production by utilizing idle space in the non-memory substrate production line in Cheongju if demand for SOCAMM modules grows faster than expected.
For the second quarter, Simtech's performance is projected to exceed market expectations, with estimated revenues of 472.8 billion won and an operating profit of 46.5 billion won, surpassing the market consensus of 43.4 billion won.
Hwang explained, "The effects of price increases reflecting the rise in raw material costs implemented at the beginning of the year are now being fully realized. The decrease in orders for low-margin tenting substrates and the ongoing decline in the price of gold, a key raw material, suggest that the trend of improving profitability will continue throughout the year."
* This article has been translated by AI.
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