KB Securities maintained its "buy" rating on DB HiTek and raised its target price from 170,000 won to 200,000 won, an 18% increase. The firm expects DB HiTek to continue improving its performance due to rising demand for 8-inch foundry services driven by growth in China's artificial intelligence (AI) data centers and robotics market.
Lee Chang-min, a researcher at KB Securities, estimated DB HiTek's third-quarter revenue at 411.2 billion won and operating profit at 120.8 billion won, representing year-on-year increases of 10% and 50%, respectively, which are expected to exceed market consensus. The operating profit margin is projected to be 29.4%.
The anticipated performance improvement is attributed to price increases in foundry services and full-capacity operations. A 5% price increase implemented in March began to take effect in June, and the full impact of these operations is expected to be realized, with an additional 10% price increase anticipated to start in September.
The supply-demand imbalance in the 8-inch foundry market is expected to persist. Leading companies like TSMC and Samsung Electronics are focusing on the 12-inch market, reducing 8-inch supply capacity, while demand from China's AI data centers and robotics is rapidly increasing. Additionally, Taiwanese companies are continuing to produce photonics with a focus on 8-inch foundries, further exacerbating the supply-demand imbalance.
As competitors are implementing price increases of 10% to 20%, DB HiTek is also expected to carry out a third price increase within the year, with two more price hikes projected for 2027.
KB Securities estimates DB HiTek's revenue for this year at 1.6 trillion won and operating profit at 424.2 billion won, marking increases of 15% and 53%, respectively, compared to the previous year.
The researcher noted that DB HiTek's current 12-month forward price-to-earnings ratio (PER) stands at 9.4, indicating that the stock is undervalued and likely to rise as performance improves.
* This article has been translated by AI.
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