Beruflich Dokumente
Kultur Dokumente
Industry Analysis
May 7, 2012
Positive (Initiate)
Analyst Julius Kim (Display)
822)768-7462, julius.kim@wooriwm.com
OLED investment to continue expanding; recent correction offers good buying opportunity
OLED investment to continue; recent correction offers buying opportunity
Recently, OLED-related shares have corrected sharply due to both the delayed start of operations of Samsung Mobile Display (SMD)s A2 Phase 3 (P3) line and concerns over SMDs lower-than-expected A3 line investments in 2012. However, after likely bottoming in 2012, we believe that investment in the OLED segment will continue to rise until at least 2015 given that SMD is expected to start investing in its: A3 Phase 1 (P1) line from 2H12, its A3 Phase 2 and 3 (P2 and P3) and V1 lines in 2013, and its A4 and V2 lines in 2014. OLED demand is set to grow rapidly, on: 1) the rising adoption of OLED panels by global IT firms; 2) the use of OLED panels in various applications; and 3) an increase in the display size of mobile devices. The OLED market should grow at a CAGR of 54.0% over 2011~2015 (from US$3.87bn to US$21.43bn).
822)768-7585, young.park@wooriwm.com
ROE 2012E 2013F 8.8 9.1 21.8 25.9 25.6 24.9 29.5 27.9 54.5 45.6
Note: Based on closing price of Apr 25; SFA, AP Systems, Tera Semicon based on consensus Source: Woori I&S Research Center estimates
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CONTENTS
I. Summary ............................................................................................................................. II. OLED Market Outlook ..................................................................................................... 1. Demand for small- to mid-sized OLED panelsbegan surging from 2012 2. Large-sized OLED panels: Demand to gain traction from 2014 III. Future OLED investment................................................................................................. 1. Past trend: Focus on display quality and mass production technology 2. Future trend: Focus on margin improvement and product development for killer apps IV. Value Chain ....................................................................................................................... 1. Equipment maker 2. Materials companies 25 14 3 6
[Company Analysis] ............................................................................................................. 1. Cheil Industries (Buy, TP W115,000) 2. Duksan Hi-metal (Buy, TP W33,000) 3. SFA (Not Rated) 4. AP Systems (Not Rated) 5. Tera Semicon (Not Rated)
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I. Summary
1. OLED market outlook
1. Mid- to small-sized OLED panels We expect SMD to invest in its A4 line after competing investment in its A3 line (over 2013~2014), given that OLED demand is likely to grow at a faster pace than is currently expected. OLED demand should surge on: 1) the rising use of OLED displays by global IT companies; 2) the adoption of OLED displays in various applications; and 3) an increase in the display size of mobile devices. And, if OLED cost savings accelerate, OLED demandbacked by LCD replacement demandshould rise sharply, outstripping forecasts. Meanwhile, OLED makers will likely have to make further fab investments in order to both meet rising demand and secure large customers such as Apple. Of note, in 2014when SMDs A3 line capacity expansion is likely completedSMDs total OLED capacity should equal 24% of global handset display demand (assumes 80% production yield).
We believe that demand for large-sized OLED panels will increase from 2014. Accordingly, investment in 8G-related mass production lines is unlikely to surface this year; but, capacity expansions for R&D pilot lines will likely continue through 2H13. Of note, we estimate that global OLED TV shipments will reach 50,000 units in 2012 and 250,000 units in 2013assuming production of 1,400 panels/month and 7,000 panels /month, respectively, SMD and LG Display (LGD)s 8G pilot lines should be able to meet this expected demand (based on 50% production yield).
Key investment focus for OLED industry: cost-reductions and developing products for killer applications
Going forward, as the industry has achieved its targets of both increasing screen resolution and solving mass production issues, investment within the OLED industry will likely shift to center on improving margins and developing products that can be used in new killer applications. As the price of OLED panels declines, in line with lower production costs, OLED should gradually replace LCD, and new flexible and transparent panels, which will likely be the basis for killer applications, should open up new markets. Cost reductions will likely come from three key areas: 1) advancements in encapsulation technology; 2) improved equipment throughput; and 3) diversification of materials suppliers. The industry is expected to focus on developing both flexible and transparent OLED panels in order to in develop products than can be used in killer applications.
OLED Industry
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3. Investment points
Sharp falls in share prices of OLEDrelated companies Recently, shares in OLED-related companies have fallen due to: 1) postponed operations of SMDs A2 P3 line; 2) delayed A3 line investment; and 3) concerns over slowing investment growth (after the A3 line has been completed) in line with the grim investment outlook for the OLED segment.
However, we believe that OLED equipment and materials plays will continue to expand over the longer term as OLED panel demand growth will likely exceed expectations, boosting facility investment. We forecast that existing domestic OLED equipment and materials producers will benefit from increased OLED investment given that: 1) they possess technological prowess; 2) they are jointly developing next generation technology (with SMD and LGD); and 3) OLED panel makers are highly likely to maintain their ties with existing companies to prevent technology leaks. In addition, we believe that the OLED growth story will move to flexible OLED panels as the relevant technology progresses. Specifically, producing flexible OLED panels is attractive for panel makers as it allows them to reduce costs; moreover, flexible OLED panels will likely be used in future killer applications. Amid the entry of new comers into the OLED segment, investment in flexible OLED should accelerate thanks to its high margins and strong growth potential.
OLED Industry
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4. Top Picks
We recommend Cheil Industries and Duksan Hi-Metal as our top picks in the OLED sector given that they should be the prime beneficiaries of expanding OLED investment. In addition, we advise paying attention to SFA (as it should benefit from the likely increasing adoption of Korean-made OLED equipment) and to AP System and Tera Semicon (as they should benefit from aggressive investments in flexible OLED).
Cheil Industries
Cheil Industriess market share is forecasted to increase rapidly until at least the end of 2012 given the positive test results for its electron transporting layer (ETL; an OLED material). Of note, the company has started developing and producing other OLED materials such as hole transporting layer (HTL) and donor film. Backed by the Samsung Groups support for core materials makers, we expect Cheil Industries to become a global materials maker.
Duksan Hi-Metal
We believe that Duksan Hi-Metals growth story is still valid as the OLED industry will likely continue expanding for some time to come. Increased demand for OLED materials produced by Duksan Hi-Metalupon the start-up of operations of SMDs A3 lineshould alleviate fears that its market share may fall due to the entry of its peers into the HTL segment. As for its customers, they are unlikely to utilize more than three vendors due to technology leak concerns. Thus, the firm should continue to grow alongside OLED industry expansion.
SFA
OLED equipment order momentum at SFA is expected to pick up in 2012 thank to SMDs A3 line investments. SMDs capacity expansions (to 88,000 panels/month at its A2 line and to 144,000 panels/month at its A3 line) are acticipated, and additional orders are highly likely, including for both front-end and logistics equipment. In addition, small mask scanning (SMS) deposition equipment (development underway for use on 8G lines) is likely to be installed on mass production lines.
AP Systems
Sales growth of laser lift off (LLO) and LITI equipment at AP Systems should draw attention to SMDs plans to mass produce flexible and high resolution OLED panels. SMDs mass production line (8G) is highly likely to adopt advanced excimer laser annealing (ELA) and encapsulation equipment (glass, metal), benefiting AP systems.
Tera Semicon
Tera Semicon is both a polyimide curing and heat-related equipment maker, and should benefit from strengthening order momentum in the industry. In particular, the OLED and oxide TFT investment trends are forecasted to allow the company to enjoy the most robust growth and earnings momentum among its peers.
OLED Industry
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Woori I&Ss outlook on OLED market is more positive than DisplaySearchs view; Woori I&S assumes A3 line will reach full capacity (144,000 panel/month) in 2013
(Unit: 000m2)
OLED Industry
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10,000 8,000 6,000 4,000 2,000 0 '08 '09 '10 '11 '12E '13F '14F
3G
4G
5G
8G
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1) OLED panels to be increasingly adopted by global IT firms on improved quality and easing supply concerns
Global IT companies, excluding SEC, have so far shunned OLED due to both its inferior resolution (compared to LTPS LCD) and panel supply shortages. For instance, when HTC first rolled out the Nexus One in 2010, the phone was installed with an OLED display; however, the company switched to an LCD display due to an OLED panel shortage. From 2012, we expect that an increasing number of global IT companies will adopt OLED panels for their IT products given that OLED technology has improved rapidly and that the starting-up of OLED operations at the SMDs A2 and A3 lines should resolve supply shortage concerns. We note that Nokia and Motorolas new flagship models are embedded with an OLED panel; moreover, we expect future smartphones to come equipped with an OLED display as standard.
Meanwhile, OLED panels will likely be installed in a variety of new segments, including media-tablet PCs (of note, SECs recently-launched the Galaxy Tab 7.7a media-tablet PC that possesses an OLED display). Given the strengths of OLED panels, especially related to playing media files (lighter, thinner, simpler, and smaller; low-energy usage), we believe that OLED panels will become widely installed in future media-tablet PCs.
Meanwhile, the size of displays for mobile devices is increasing, a trend that deserves attention. SECs Galaxy Note, a recent hit product, has a 5.3-inch displayit is about 50% larger than the Galaxy S display. Noting that SMDs 5.5G fab has the capacity to produce 350 Galaxy S-sized display panels per sheet or 210 Galaxy Note-sized display panels (assuming 100% production yield), we believe that the increasing size of mobile displays will contribute to boosting demand for small- and mid-sized OLED panels.
OLED Industry
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Source: DisplaySearch
2008
2009
2010
2011
2012
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In our view, SMD will start investing in its A4 line, alongside investment in its A3 line, over 2013 and 2014 in order to cope with the expected demand surge for small-and mid-sized OLED panels. SMD likely needs to secure additional capacity in order to not only meet growing demand from the smartphone and media-tablet PC market, but also to induce major clients, including Apple, to adopt OLED panels. Of note, SMDs capacity should satisfy 24% of the global handset display demand in 2014 (assuming 80% yield), equivalent to 260mn 4.3-inch smartphone display panels and 67mn 9.7-inch media-tablet PC display panels.
iPad (9.7) (unit: mn) 8.6 59.1 96.7 164.4 131.5 115.0
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OLED Industry
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A1+A2+A3
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Tipping point to be reached when OLED TV price falls below W3mn/unit Killer application for OLED TV: 3D
Given the history of LED and LCD TVs, we believe that the OLED TV market will reach tipping point when the price tag falls below W3mn/unit. Considering the present rate of OLED development, we believe this will happen in 2014.
When purchasing a new TV, consumers consider not only the price but also whether it possesses a killer application. Woori I&S believes that 3D will be the killer application for OLED TV. In detail, OLED panels possess a number of attributes that make them ideal for rendering 3D, they have both a much faster response rate and superior contrast range (vs LCD displays). We project that OLED TV sales will gain traction from 2014, when terrestrial broadcasting channels are likely to begin providing programs in 3D (without the need to have a set-top box).
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OLED Industry
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Based on Woori I&Ss forecasts for 2012 and 2013 OLED TV demand (50,000 units in 2012 and 250,000 in 2013), the following conditions will be needed in order to meet anticipated large-sized OLED display demand: monthly capacity of 1,400/sheets and 7,000/sheets (at 8G lines; 50% production yield) in 2012 and 2013, respectively. And, we believe that SMD and LGDs pilot lines will be sufficient to meet expected demand in both 2012 and in 2013.
Accordingly, aggressive investment in 8G lines appears unnecessary in 2012. We project that SMD and LGD will focus on expanding their pilot lines for R&D purposes in 2012 and that they will construct mass production lines from 1H13 (after accumulating extensive technological know-how).
V1 pilot line to meet early demand, but full-fledged investment required from 2013
(Unit: 1,000m2)
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OLED Industry
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Over the past three years, the display quality of OLED has improved rapidly (in terms of size, pixel per inch (ppi), and pixel composition). Specifically, the size of OLED panels for cell phones has increased from to 3.7-inch to 5.3-inch, the ppi has risen from 167 to more than 280, and the display composition has improved (from pentile to RGB stripe). Improved quality can be seen by comparing the recently released Lumia900 (Nokia) with the Lumia 800 (RGB stripe vs pentile), and comparing the Galaxy Note with the iPhone 4S (OLED display vs LCD display).
Mass production technology has also improved rapidly, highlighted by the progress made in organic material deposition technology. In 2009, deposition was achieved by cutting 4G sheets into two pieces. Along with steady advances in technology, in 2010, 5.5G sheets were cut into four pieces; furthermore, deposition in 1H13 will likely be done without the need to cut. OLED capacity has also increased rapidly, backed by advances in mass production technology and improving yields. SMD invested in its A1 P3 line in 2009, its A2 P1 and P2 lines in 2010, and its A2 P3 line in 2011, raising capacity by a factor of 3.2 (from 208.7km2 in 2009 to 881.1km2 in 2011).
Meanwhile, we believe that the localization of OLED equipment and materials also merits attention. While SMDs A1 line was constructed using imported equipment, localization is rapidly underway, including for materials and encapsulation equipment for the A2 line and organic material deposition equipment for the A3 line. Of note, organic material deposition used to be a major technical issue for OLED panel makers, and it limited increases in OLED panel size. As for organic materials, while the import portion of EML (emissive layer (red, green, blue)) remains lofty, localization of key raw materials HTL and ETLaccount for the largest portion of organic material demand (from OLED panel makers)has been completed. Of note, OLED localization is taking place at a faster rate than in other IT segments.
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OLED Industry
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350ppi and above not Launch of iPhone 4 necessary High resoluiton on LITI process
OLED capable of realizing 300ppi resolution (or above) thanks to LITI; competition over quality of display has become meaningless
50 0 '09
'10
'11
'12E
OLED capacity rising (by shipment area) on advances in mass production technology
(000m2) 1,000 800 600 400 200 0
'08
'09
'10
'11
Model Display Size (inch) Resolution (dot) Type PPI (RGB converted) Release
Galaxy Note 5.3 WXGA (1280X800) Pentile 285 (190) Aug 2011
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OLED Industry
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Source: Phonearena.com
Source: Phonearena.com
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OLED Industry
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We believe that the focus of the industry will be quite different from that seen in the past. As advances in deposition technology should end the debate over ppi, we expect the OLED industry to begin focusing on other strengths of OLED.
2009
2010
2011
2012
2013
2014
Cost reduction
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OLED Industry
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Cost reductions are forecasted to come from three key areas: 1) advancements in encapsulation technology; 2) improved equipment throughput; and 3) diversification of materials suppliers. Handset panel ASP: Price premium of OLED panels vs LCD panels falls, eroding LCD panel market share
(US$) 50 40 30 20 10 0 1Q11 2Q11 3Q11 4Q11 1Q12E 2Q12F 3Q12F 4Q12F 1Q13F 2Q13F 3Q13F 20 40
4.0'' Premium(RHS) 4.0''AMOLED(LHS) 4.0''LTPS LCD(LHS) 4.3'' Premium(RHS) 4.3''AMOLED(LHS) 4.3''LTPS LCD(LHS)
(%) 50
30
Source: DisplaySearch
Source: DisplaySearch
Source: DisplaySearch
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OLED Industry
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As OLED panels are sensitive to moisture and air, encapsulation is necessary. When glass is replaced with other materials, costs can be reduced. Glass accounts for a substantial portion of display production costs; as such, the development of an alternative material should lead to a decline in manufacturing costs. Thus, glass demand should fall over the mid- to long-term, putting pressure on glass makers to reduce ASPs.
Encapsulation technology used for OLED panels will likely differ by application. While thinfilm encapsulation technology is expected to be used for small and mid-sized panels (frontlit), a range of encapsulation materials (including metal) are forecasted to be utilized for backlit large-sized panels. As a result, the use of glass as an encapsulation material should decrease going forwards.
Mass production using thin-film encapsulation is expected to begin in the near future for small- to mid-sized panels (at SMDs A2 P3 line). However, mass production of metal encapsulation (for larger-sized panels) will likely take a while longer to emerge due to its weak adhesive power.
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Glass 22.4%
Others 77.6%
20 0 15.6 55'' TV
25.9
4'' Handset
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OLED Industry
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OLED panel manufacturing costs are set to decline on improving equipment throughput as efficiency should rise on debottlenecking. Currently, a technical bottleneck exists at both the poly-si TFT process (panel cut into two pieces due to limited laser beam output) and the organic chemical vapor deposition process (panel cut into four pieces due to mask sagging under the force of gravity). Improved throughput should result in debottlenecking at these stages, raising mass production efficiency and cutting costs.
Despite the prospect of improved throughput negatively impacting equipment makersgiven the possible reduction in equipment demandwe believe that improved throughput will benefit them.
OLED panel makers to maintain status quo with suppliers due technology leak concerns Equipment makers potential to secure technology and experience mass production environment
Throughput improvement can come from either calibrating the line or from developing new equipment. Given the absence of standardized production in the OLED industry, OLED panel makers face the possibility of a technology leaks. Thus, they are highly likely to continue working with their existing suppliers (equipment and materials makers).
Domestic OLED equipment makers currently lag behind their global peers in terms of technology. However, if SMD or LGD decide to work with equipment makers, equipment makers will likely acquire additional technological know-how, facilitating their evolution into becoming global players (if domestic OLED production technology becomes the industry standardas expected).
SMD
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OLED Industry
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Diversification of materials suppliers should help save costs for OLED panel makers. For example, Duksan Hi-Metal and LG Chem used have a duopoly in the supply of HTL and ETL to SMD. However, since 2H11, CSElsolar and Cheil Industries have also been supplying the materials to SMD, likely intensifying competition between the materials makers. Moreover, EMLa material whose import portion is highis now being locally produced, helping panel makers save costs.
Thus, concern has arisen over downward pricing pressure on the materials market, which may undermine growth in the segment. Of note, SMD has a number of OLED materials patents, which it allows its materials suppliers to use; thus, the company possesses an upper hand in the materials market.
We advise focusing more on the longer-term growth potential of the OLED market rather than on lower organic material ASP concerns, as: 1) demand for organic materials should surge OLED panels are set to become increasingly adopted for not only high-end smartphones but for TVs as well; and 2) panel makers will likely procure materials from only two or three vendors out of technology leak fears (thus, a vendor should carry on supplying 20~40% of the OLED materials needs of the OLED panel maker that it currently services).
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OLED Industry
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We believe that panel makers will accelerate investing in flexible OLED, as: 1) it should help them reduce costs (no glass is used); 2) it is lighter and more shock-resistant than conventional display panels (should help make smart devices lighter and thinner); and 3) new markets can likely be created.
In fact, SMD is set to begin mass producing flexible OLED panels in 2H12 via its A2 P3 line, while LGDwhich is currently focusing on LTPS LCD in the smaller panel marketis likely to continue developing 4G flexible OLED technology.
Key technologies for flexible OLED panel: flexible TFT substrate and thinfilm encapsulation
Key technologies required to produce flexible OLED include flexible TFT substrate and thinfilm encapsulation. The manufacturing process includes: 1) the deposition of polyimide on glass; 2) the creation of TFT and organic layers; 3) the deposition of organic and inorganic layers (and their encapsulation); and 4) the separation of glass and polyimide. Some expectations exist in the market that flexible OLED panels will be used for the Galaxy S3. But, we believe that this is unlikely given the rollout schedule for flexible panels at the A2 P3 line and the launch date of the Galaxy S3 (as well as lack of capacity and low yields). Thin-film packaging process: deposition of organic and inorganic layers
Cost reduction
Thin, light
Flexible OLED
Unbreakble
Design Free
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OLED Industry
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OLED panels that emit light on both sidesso do not need BLUare likely to be used for transparent displays. Transparent OLED panels will likely be adopted in a variety of products. However, we forecast that its will take a while longer before transparent OLED panels are ready to be mass produced as a number of technologies still need to be advanced, including the transparency of TFT and electrode layers. As for TFT, a-si and poly-si have to be substituted as they are not transparent, while electrode layers will need to be replaced or made thinner as they are made from metal. Therefore, we are of the opinion that it is necessary for the OLED industry to develop materials such as oxide, organic (materials), nanowire (for TFTs), and graphene and CNT (for transparent electrodes).
Source: HowStuffWorks.com
Source: SEC
Source: LUMUS
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OLED Industry
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The OLED panel manufacturing process is largely composed of: 1) backplane; 2) deposition; and 3) encapsulation and logistics. While localization has largely been completed in the TFT, encapsulation, and logistics segments, dependence on imported deposition equipment remains lofty; thus, deposition technology development is underway by domestic OLED equipment makers.
Metal Laser Lift Off (LLO) Glass cutting system Backend process
Source: Woori I&S Research Center
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OLED Industry
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1) What is TFT?
TFT is a thin-film semiconductor embedded on a glass substrate. TFT is composed of gates, drains, and sources, and controls the contrast of the display.
A-si TFT used for LCD is not suitable for OLED due to its low electron mobility. Thus, polysi and a-oxide are used for OLED TFT thanks to their faster electron mobility (vs a-si).
Poly-si TFT
Low temperature poly-si (LTPS) is widely used for conversion of a-si into poly-si. As TFT is made from glass, it is sensitive to heat; as such, low temperatures are critical to the manufacturing process. SMD uses ELA on its 5.5G mass production line, and tests employing ELA and super grain silicon (SGS) are underway at its pilot 8G line.
a-oxide TFT
While electron mobility is high for LTPS, uniformity is low and production costs are lofty. Thus, development of a-oxide TFT is taking place at a rapid pace. A-oxide TFT is superior to LTPS as: 1) it requires less masks; 2) its initial equipment investment burden is small (process is similar to existing LCD mass production so relatively low investment burden); and 3) it can be used in the mass production of high resolution OLED panels. Of note, a growing number of OLED makers, including Sharp and LGD, have started using a-oxide TFT technology to produce OLED panels.
Organic
Oxide
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OLED Industry
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Clean
PECVD
Mask1
Dry Etching
Dry Etching Wet Etching Dry Etching Wet Etching Wet Etching Hydrogenation
PECVD Sputter MOCVD? Mask2 Wet Etching Dry Etching Wet Etching Dry Etching Wet Etching Wet Etching Thermal Curing
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OLED Industry
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2) Deposition
The deposition process refers to layering organic materials such as HTL, EML (RGB), and ETL on TFT. FMM evaporation is used on SMDs 5.5G A2 line, and HPS (FMM evaporation and LITI) will be used on its A3 line (in order to enhance resolution). Of note, SMS will be used on its 8G V1 line.
FMM evaporation
Fine metal mask (FMM) evaporationdepositing organic materials (heated and evaporated within patterned masks)is used on SMDs 5.5G A2 P2 line. It is easy to apply the technology, but difficult to achieve a high resolution. Of note, the deposition of organic materials tends to generate low yields.
HPS
HPS is a combination of FMM evaporation and LITI, and will likely be used on SMDs 5.5G A2 P3 line. The technology evaporates a charged layer and creates red and green patterns with LITI (results in high resolution). However, additional processing (vs evaporation) is necessary due to LITI, and it is difficult to scale up the process; as such, it is unlikely to be used on 8G lines.
FMM cannot be used on mass production 8G lines as the mask easily sags under the force of gravity. To complement this weakness, SMS was developed (small masks are moved in order to facilitate deposition without sagging).
HPS 2.5
> 6G > 300 ~ 20,000 18~22 Small molecules Mid-high
Printing 5
> 6G < 200 ~ 5,000 12~15 Soluble (small or polymer) Low
WOLED 1.5
> 6G > 300 ~ 5,000 12~15 Small molecules; color filter Mid-high
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SMD: Evaporation used up until (and including) A2 P2 linedifficult to create large-sized highresolution panels due to sagging mask phenomenon
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Pre-Treatment
HIL/HTL
EML-R
LITI(Red)
Array Test
EML-G
LITI(Green)
AOI
EML-B
Evaporation(Blue)
ETL/EIL
Evaporation(Blue)
Cathod
ITO Sputtering
Glass Out
Source: Woori I&S Research Center
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3) Encapsulation equipment
OLED is highly sensitive to moisture and oxygena basic characteristic of organic materials. Thus, encapsulation is needed to protect the organic materials. Of note, the type of encapsulation used differs by light-emitting technology (front-lit vs back-lit).
Smaller OLED panels emit light on both sides, requiring transparent encapsulation materials Large OLED panels emit light on their reverse, allowing flexible selection of materials
For smaller OLED panels (light emitted on both sides), transparent glass or thin-film encapsulation (protecting both organic and inorganic layers) is applied. SMD has adopted glass encapsulation on its 5.5G A2 P2 line. Going forward, the firm plans to use thin-film encapsulation on the A2 P3 line due to glass being both expensive and inflexible.
Large panels emit light on their reverse, allowing the selection of encapsulation materials to be less restricted. Currently, SMD and LGD are developing a variety of encapsulation processes that can be used for large panels. Glass is the most common encapsulation material, but it is expensive and difficult to apply frit technology to large panels. Metal is cheaper, but yields are lower due to differences in the nature of TFT substrate and metal.
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Encapsulation process
Small-Middle Size Panel Glass Encapsulation(Frit Type) Encap:AP Systems, Frit: LTS Frit Sintering: Tera Semicon, Viatron
Sealant
Large Size Panel Glass Encapsulation(Frit Type) Encap:AP Systems Frit: LTS Frit Sintering: Tera Semicon, Viatron
Sealant
Thin Film Encapsulation Organic : SNU Inorganic: Ulvac(Sputter) Wonik IPS(ALD, PECVD)
Sealant
Getter
Sealant
Encap Glass
Encap Metal
Encap Glass Al2O3 TFT Glass Polymer Polymer Polymer Encap Glass TFT Glass UV Curing(Sealant) Polymer
Encap Glass
TFT Glass
Epoxy
TFT Glass
Laser Curing(Frit)
UV Curing(Sealant)
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OLED Industry
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Compared to LCD and semicon materials, a relatively large portion of OLED materials are supplied to Korean panel makers by Korean companies. However, Korea still imports a large portion of its EML material requirements. Given the high cost burden of EML, we believe that domestic materials makers need to develop EML in order to increase their market share in the OLED materials segment.
OLED structure
AI EIL ETL Emitting layer HTL HIL ITO Glass substrate AI
OLED materials
Color
Fluorescent
Phosphorescent
Red
Green
Blue
Japan Idemitsu Kosan Hodogaya Chemical Shinitzu Chemical Toray Sony Chemical Sumation
US and others Universal Display Corp (UDC) Eastman Kodak DuPont Merck Dow Chemical CDT (UK) Novaled (Germany)
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HTL
HTL is a layer that carries electron holes into the emissive layer. As HTL requires thicker deposition than other layers, to eliminate the pin hole and peak phenomena, HTL formation consumes more materials than the formation of other layers. Duksan Hi-Metal dominates the Korean HTL market. However, as the HTL market is the largest among the various OLED materials markets, it has attracted many new players. CSElsolar entered the market at the end of 2011, and Cheil Industries is expected to move into the arena in 1H13. Of note, we forecast that Duksan Hi-Metal, Cheil Industries, and CSElsolar will supply a respective 40%, 35%, and 25% of SMDs HTL needs over the midto long term.
EML
The holes and electrons transported through HTL and ETL come together at EML, emitting light at various wavelengths. EML materials emit either red, green, or blue depending on: the wavelength of the light, the emission type (florescent or phosphorescent), and the role played in emission (host or dopant). The most recent EML issue is whether to introduce phosphorescent material, which has a superior theoretic luminous efficiency (75~100%) and consumes less energy (vs fluorescent). In other words, phosphorescent should help extend the batterys charge (when it is used in high-quality display and smart devices). Thus, many companies have been developing phosphorescent EML, and sooner or later, phosphorescent is expected to replace fluorescent in EML. We note that phosphorescent is already used for red organic material, and from 2H12, phosphorescent will replace florescent for green organic material.
ETL
As mentioned earlier, ETL is a layer that moves electrons to EML. Thanks to its easier manufacturing process and low raw material costs, ETL is around 15~20% cheaper than HTL. So far, LG Chem is the exclusive ETL supplier to SMD. However, with Cheil Industries entering the market at end-2011, we expect it to supply ETL to SMD (along with LG Chem). Given its close relationship with SMD, we project that Cheil Industries will supply 30~40% of SMDs ETL needs by end-2012.
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Charged layer
Duksan Hi-metal, Doosan-CSElsolar, Cheil Ind Duksan Hi-metal LG Chem, Cheil Ind LG Chem DOW Graclel UDC Duksan Hi-metal, Cheil Ind UDC Doosan-CSElsolar UDC SFC SFC
Emissive layer
35
OLED Industry
www.wooriwm.com
(Units: 1,000m2)
CMEL IRICO IRICO Japan Display Mobara AMOLED LG Display LGD AP1-E1 LG Display LGD AP2-E2 LG Display LG Display LGD M1 SMD SDI A1 SMD SMD SMD SMD A2 SMD SMD SMD SMD SMD A3 SMD SMD SMD SMD A4 SMD SMD SMD SMD V1 SMD SMD V1 Pilot SMD SMD V2 Panasonic IPSA Himeji 1 TMDisplay Ishikawa Total
OLED Gen 4 3.25 5.5 3.25 3.25 4 4 6 4 4 4 8 4 4 4 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 8 8 8 5 4
Cut 2 1 4 2 2 2 2 1 2 2 2 2 2 2 2 4 4 4 4 1 1 1 1 1 1 1 6 1 1 2
Install Oct-11 Sep-10 Jun-14 Mar-13 Feb-07 Dec-12 Oct-13 Nov-13 Mar-08 Dec-09 Nov-10 Jul-11 Apr-06 Aug-08 Jan-10 Dec-10 Jul-11 Aug-11 Feb-12 Nov-12 Apr-13 Jan-13 Apr-14 Jan-13 Aug-11 Jan-14 Jun-12 Nov-08
MP Ramp Sep-12 May-12 Oct-14 Sep-13 Jul-07 Jun-13 Jun-14 Jun-14 Sep-09 Mar-11 May-11 May-12 Sep-07 May-09 Jun-10 May-11 Oct-11 Apr-12 Jun-12 Apr-13 Aug-13 Aug-13 Jan-15 Aug-13 Apr-12 Aug-14 Dec-12 Oct-12
2012 15 22 0 0 33 0 0 0 0 48 40 132 109 56 193 562 702 105 293 0 0 0 0 0 0 0 121 0 4 3 2,483
2013 111 39 0 8 39 35 0 0 0 48 40 264 109 56 193 562 749 187 562 702 304 94 0 0 0 495 385 0 50 30 5,114
2014 121 39 29 45 39 121 60 216 0 48 40 264 109 56 193 562 749 187 562 1123 1123 1053 0 0 0 1980 396 495 50 32 9,750
36
Buy (Initiate)
TP W115,000 (Initiate)
W91,800 CP (12/04/25)
Analyst Julius Kim (Display)
822)768-7462, julius.kim@wooriwm.com
822)768-7585, young.park@wooriwm.com
Sector
Chemicals
Kospi 1,961.98 Kosdaq 483.48 Market cap (common) W4,813.8bn Outstanding shares (common) 52.4mn shrs 52W high (11/05/31) W138,000 low (11/09/26) W74,000 Dividend yield (2011) 0.7% Foreign ownership 24.3% Major shareholders National Pension Service (NPS) Samsung Card and 5 others Share performance (%)3M Absolute Relative Price trend
200 150 100 50 0 '11.4 '11.6 '11.8 '11.10 '11.12 '12.2 '12.4 Cheil Industries KOSPI
Chemical and fashion divisions: Margins to improve on output growth and decrease in fixed costs
Going forward, the chemical division should experience both top- and bottom-line growth. Moreover, shipment volume is expected to increase on: 1) the anticipated continuation of the recovery in IT product demand; and 2) completion of EP capacity expansion in 3Q12. Margins should gradually improve in line with likely decreased fixed costs. We believe that the fashion division will remain a steady cash cow for the company. Stable earnings growth should be possible, as: 1) following continual losses, a turnaround is expected for womens wear unit; and 2) the divisions already diverse product portfolio should be positively impacted by the launch of new brand SPA 8 Seconds.
6M -8.2 -11.6
-10.9 -11.3
Debt/equity Net debt (%) (Wbn) 46.0 53.3 52.9 52.3 51.6 281 754 783 677 559
Note: IFRS basis, but operating profit based on adjusted operating income (gross profit SG&A expenses); EPS, P/E and ROE excluding minority interests based on consensus Source: Woori I&S Research Center estimates
www.wooriwm.com
Cheil Ind
www.wooriwm.com
II. Valuations
Initiate with Buy and target price of W115,000 We initiate coverage on Cheil Ind with a Buy rating and a target price of W115,000. Our target price was derived using the sum of operating value (based on RIM) and asset value (based on sum-of-the-parts valuation). The RIM-derived calculations assume a market risk premium of 6.0%, a risk free rate of 4.0%, and a beta of 1.2, with a CoE of 11.2%. Our target price equates to 20.5x 2012 EPS (W5,621) and 18.3x 2013 EPS (W6,301).
Note: The residual income model (RIM) is a cash flow approach that yields a fair shareholder value (value of equity) by adding shareholders equity and present value of residual income (meaning income excluding cost of equity). Value of equity = shareholders equity + sum of present value of future residual income * Residual income (RIt) = NP (t) shareholders equity(t-1) * cost of equity (t)= shareholders equity (t-1) * (ROEt - COEt) Woori I&S uses RIM as our primary valuation model as RIM is an objective model that minimizes subjectivity of valuation indicators while producing same results as the dividend discount model (DDM) and DCF.
38
Cheil Ind
www.wooriwm.com
(Units: Wbn)
2. Asset value Listed shares Unlisted shares Shares subject to equity-method valuation Sub-total
Note: Listed shares based on closing prices on Apr 24 Unlisted shares based on book value Shares subject to equity-method valuation based on book value 3. Fair value Number of shares (000) Treasury shares (000) Sum of operating and asset value (Wbn) Fair value (won) 52,438 1,865 5,817.4 115,031.4
39
Cheil Ind
www.wooriwm.com
We project full-year 2012 sales of W6,183.8bn (up 10.7% y-y) and adjusted operating profit of W383.2bn (up 80.9% y-y), backed by: 1) anticipated growth at the EM division thanks to increased supply of semiconductor and OLED materials; 2) the chemical unit benefiting from resilient IT demand; and 3) likely top-line growth at the fashion division on the launch of new brands. We believe that Cheil Inds supply of high-margin OLED materials will justify its high valuations.
Earnings forecasts
2011 Sales Operating profit EBITDA Net profit EPS P/E P/B EV/EBITDA ROE 5,581 222 384 259 5,079 19.9 1.6 15.7 8.7 2012E 6,184 383 622 295 5,621 16.3 1.4 9.0 8.8 2013F 6,836 438 689 330 6,301 14.6 1.3 8.0 9.1
2014F 7,553 493 756 368 7,016 13.1 1.2 7.1 9.4
40
Cheil Ind
www.wooriwm.com
Sales breakdown
(Wbn) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1Q10 3Q10 1Q11 3Q11 1Q12E 3Q12F
Fashion E.M Chemical
ABS, PS spreads
($MT) 1,000 800 600 400 200 0 -200 -400 '08.4 '08.11 '09.6 '10.1 '10.9 '11.4 '11.11
41
Cheil Ind
www.wooriwm.com
Quarterly earnings
1Q11 Sales (Wbn) Chemical EM Fashion Total Operating profit (Wbn) Chemical EM Fashion Total Adj operating (Wbn) Operating margin Chemical EM Fashion Total Sales growth q-q Chemical EM Fashion Total profit 2Q11 3Q11 4Q11 1Q12E 2Q12F 3Q12F 4Q12F 2011 2012E 2013F
Operating profit growth q-q Chemical 7.3% EM 1,003.0% Fashion 124.2% Total 104.5% % of sales Chemical EM Fashion Total % of operating profit Chemical EM Fashion Total 44.4% 27.4% 28.2% 100.0% 35.3% 36.2% 28.5% 100.0%
-35.2% -26.1% -61.3% -39.4% 43.9% 27.5% 28.6% 100.0% 37.7% 44.1% 18.2% 100.0%
-90.0% 153.2% -52.3% 24.1% 45.0% 30.0% 25.0% 100.0% 3.0% 90.0% 7.0% 100.0%
321.7% -73.9% 339.6% -32.9% 39.7% 26.8% 33.5% 100.0% 19.1% 35.0% 45.9% 100.0%
150.1% 164.9% -0.3% 86.3% 42.9% 27.9% 29.2% 100.0% 25.6% 49.8% 24.5% 100.0%
18.0% -20.2% -11.8% -8.3% 41.5% 29.0% 29.5% 100.0% 33.0% 43.4% 23.6% 100.0%
43.9% 29.7% -35.2% 19.1% 46.1% 30.1% 23.8% 100.0% 39.9% 47.3% 12.9% 100.0%
-22.0% -9.8% 86.2% -2.3% 40.8% 28.2% 31.0% 100.0% 31.9% 43.6% 24.5% 100.0%
-57.6% 43.6% 14.4% -13.2% 43.2% 27.9% 28.9% 100.0% 24.6% 52.1% 23.9% 100.0%
79.1% 19.1% 19.5% 34.6% 42.8% 28.8% 28.4% 100.0% 32.7% 46.1% 21.2% 100.0%
11.4% 15.5% 18.2% 14.7% 42.5% 29.7% 27.8% 100.0% 31.8% 46.4% 21.8% 100.0%
Note: IFRS consolidated basis Source: Woori I&S Research Center estimates
42
Cheil Ind
STATEMENT OF COMPREHENSIVE INCOME
(Wbn) Sales Growth (%) COGS Gross Profit Gross margin (%) SG&A GAAP Operating Income GAAP Operating margin (%) Other Operating Income(Exp.) EBITDA Operating Income Operating margin (%) Financial Income(Costs) Other Non-Operating Profits
Gains(Losses) in Associates, Subsidiaries and JVs
www.wooriwm.com
VALUATION INDEX
Price/Earnings (x) P/E (High, x) P/E (Low, x) Price/ Book Value (x) P/B (High, x) P/B (Low, x) Price/ Gross Cash Flow (x) Price/ Sales (x) P/E/ EPS growth (x) P/E/ EBITPS growth (x) P/E/ EBITDAPS growth (x) EV/ EBITDA (x) EV/ EBIT (x) Enterprise Value (Wbn) EPS CAGR (3-Yr) (%) EBITPS CAGR (3-Yr) (%) EBITDAPS CAGR (3-Yr) (%) EBITPS (won) EBITDAPS (won) Fully diluted EPS (won) BVPS (won) CFPS (won) Sales PS (won) DPS (won) 2011/12A 2012/12E 2013/12F 2014/12F 19.9 16.3 14.6 13.1 27.5 19.5 17.4 15.6 13.9 16.1 14.4 12.9 1.6 1.4 1.3 1.2 2.3 1.7 1.5 1.4 1.2 1.4 1.3 1.2 12.5 7.9 7.1 6.5 0.9 0.8 0.7 0.6 1.7 1.6 1.1 0.6 0.7 1.4 1.0 0.7 0.8 1.8 1.4 0.9 15.7 9.0 8.0 7.1 27.2 14.6 12.6 10.9 6,050 5,597 5,492 5,373 11.4 9.9 13.8 20.2 29.2 11.6 14.2 19.6 24.1 9.0 10.5 14.3 4,361 7,308 8,344 9,400 7,531 11,857 13,148 14,410 5,079 5,621 6,301 7,016 61,333 66,231 71,808 78,101 8,073 11,566 12,888 14,169 109,399 117,926 130,369 144,038 750 750 750 750
Pre-tax Profit from Cont. Op. Income Taxes Profit from Continuing Op. Net Profit Net margin (%) Net Profit of Parent Net Profit to Non-Controlling Other Comprehensive Income Total Comprehensive Income
2011/12A 2012/12E 2013/12F 2014/12F 5,581 6,184 6,836 7,553 9.2 10.8 10.6 10.5 3,997 4,376 4,910 5,494 1,584 1,808 1,926 2,060 28.4 29.2 28.2 27.3 1,361 1,425 1,488 1,567 222 383 438 493 4.0 6.2 6.4 6.5 65 2 5 8 384 622 689 756 287 386 442 501 5.1 6.2 6.5 6.6 -24 -39 -39 -41 0 0 0 0 12 0 0 0 276 347 403 460 17 52 73 92 259 295 330 368 259 295 330 368 4.6 4.8 4.8 4.9 259 295 330 368 0 0 0 0 -68 0 0 0 191 295 330 368
2,845.1 350.6 12.9 6.0 170.3 383.2 239 -420.0 -77.1 221.4 4.1 8.4 6.9
2,990.2 385.7 13.2 6.5 194.8 437.5 252 -300.0 -87.0 397.7 4.0 8.1 6.7
3,143.1 423.9 13.8 7.2 227.0 492.9 263 -300.0 -95.6 452.6 3.9 8.0 6.6
43
Buy (Initiate)
TP W33,000 (Initiate)
W24,800 CP (12/04/25)
Analyst Julius Kim (Display)
822)768-7462, julius.kim@wooriwm.com
822)768-7585, young.park@wooriwm.com
Benefits from growing OLED industry to exceed weight of falling market share and ASP cut pressure
Duksan Hi-Metal should enjoy strong 2012 top-line expansion (up 14.7% y-y), despite: 1) a likely falling market share upon the entry of new competitors; and 2) price-cutting pressure.
Sector
Semiconductors
Kospi 1,961.98 Kosdaq 483.48 Market cap (common) W728.9bn Outstanding shares (common) 29.4mn shrs 52W high (11/08/03) W30,150 low (11/05/23) W19,800 Dividend yield (2011) 0.0% Foreign ownership 16.2% Major shareholders Jun-Ho Lee and 11 others Share performance (%)3M Absolute Relative Price trend
200 150 100 50 0 '11.4 '11.6 '11.8 '11.10 '11.12 '12.2 '12.4 DS Hi-metal KOSDAQ
Going forward, Duksan Hi-Metal Business should enjoy a favorable environment, backed by: 1) the start of operations of SMDs A3 and V1 lines; and 2) likely additional HTL demand in the wake of SMDs adoption of a twotrack (RGB, WOLED) strategy. Of note, WOLED consumes 50~100% more HTL than RGB. Furthermore, Duksan Hi-Metal should be a primary beneficiary of OLED industry expansion, supported by the tendency of client companies to limit their number of vendors to three or less in order to prevent technology leaks.
+0.4 +6.2
OP (Wbn) 13 39 40 62 81
NP (Wbn) 10 35 34 51 67
NP to parent (Wbn) 10 35 34 51 67
ROE Debt/equity (%) (%) 12.4 29.0 21.8 25.9 26.0 19.7 9.6 8.5 8.0 6.9
Note: IFRS basis, but operating profit based on adjusted operating income (gross profit SG&A expenses); EPS, P/E and ROE excluding minority interests based on consensus Source: Woori I&S Research Center estimates
www.wooriwm.com
Duksan Hi-Metal
www.wooriwm.com
II. Valuation
1. Target price of W33,000 based on RIM valuation
Target price of W33,00036% upside potential We initiate our coverage on Duksan Hi-Metal with a Buy recommendation and a target price of W33,000. Our RIM-derived target price assumes a market risk premium of 7.0%, a risk free rate of 4.0%, and a beta of 1.2, with a CoE of 12.4%. The target price is equivalent to a 2012 P/E of 28.6x (EPS forecasted at W1,153) and a 2013 P/E of 18.9x (EPS at W1,744).
RIM valuation
2012F Net profit Shareholders equity Forecast ROE (FROE) Spread (FROE-COE) Residual income Cost of equity (COE) Beta Market risk premium (Rm-Rf) Risk-free rate (Rf) Beginning shareholders equity PV of forecast period RI PV of continuing value Equity value (C+P) No of shares (common, thou) Fair price (C) Current price (C) Upside (-downside) Implied P/B (x) Implied P/E (x) 34 172 21.8% 9.4% 15 12.4% 1.2 7.0% 4.0% 139 410 317 866 29 12m TP 33,105 24,800 33.5% 6.5 24.5 2013F 51 224 25.9% 13.5% 27 2014F 67 290 26.0% 13.6% 35 2015F 82 372 24.7% 12.3% 41 2016F 108 480 25.3% 12.9% 55 2017F 140 620 25.5% 13.1% 72 2018F 170 787 24.1% 11.7% 82 2019F 207 985 23.4% 11.0% 97 2020F 250 1,221 22.7% 10.3% 114 2021F 303 1,500 22.3% 9.9% 134
Note: The residual income model is a cash flow approach that yields a fair shareholder value (value of equity) by adding shareholders equity and present value of residual income (meaning income excluding cost of equity). Value of equity = shareholders equity + sum of present value of future residual income * Residual income (RIt) = NP (t) shareholders equity (t-1) * cost of equity (t)= shareholders equity (t-1) * (ROEt - COEt) Woori I&S uses RIM as our primary valuation model as RIM is an objective model that minimizes subjectivity of valuation indicators while producing same results as the dividend discount model (DDM) and DCF.
45
Duksan Hi-Metal
www.wooriwm.com
Looking at full-year 2012, we believe that Duksan Hi-Metal will register sales of W148.4bn (up 14.7% y-y) and operating profit of W39.3bn (up 12.4% y-y). The companys earnings growth should weaken y-y on: 1) a market share decline upon the entry of new competitors; and 2) lower ASPs. However, we expect earnings growth momentum to pick up strongly after 2H12, believing that HTL demand will surge in the wake of: 1) the start up of operations of SMDs A2 P3 line in 2Q12 and of its A3 line in 2012; and 2) anticipated mass production of WOLED TVs. Furthermore, any decline in market share should be limited as Duksan Hi-Metal should be a primary beneficiary of anticipated OLED industry expansion, supported by the tendency of client companies to limit their number of vendors to three or less in order to prevent technology leaks. All in all, we view Duksan Hi-Metal as being positioned to be a primary beneficiary of anticipated growth of the OLED industry going forward.
(Units: Wmn, %)
46
Duksan Hi-Metal
www.wooriwm.com
WOLED structures
Single EML
Source: Industry data
Multi EML
Tandem
47
Duksan Hi-Metal
www.wooriwm.com
VALUATION INDEX
Price/Earnings (x) P/E (High, x) P/E (Low, x) Price/ Book Value (x) P/B (High, x) P/B (Low, x) Price/ Gross Cash Flow (x) Price/ Sales (x) P/E/ EPS growth (x) P/E/ EBITPS growth (x) P/E/ EBITDAPS growth (x) EV/ EBITDA (x) EV/ EBIT (x) Enterprise Value (Wbn) EPS CAGR (3-Yr) (%) EBITPS CAGR (3-Yr) (%) EBITDAPS CAGR (3-Yr) (%) EBITPS (won) EBITDAPS (won) Fully diluted EPS (won) BVPS (won) CFPS (won) Sales PS (won) DPS (won) 2011/12A 2012/12E 2013/12F 2014/12F 21.5 21.5 14.2 10.9 27.3 23.9 15.8 12.1 16.3 18.4 12.2 9.4 5.4 4.2 3.3 2.5 6.8 4.7 3.6 2.8 4.1 3.6 2.8 2.2 16.2 16.1 10.5 8.2 5.7 4.9 3.7 3.1 0.9 0.6 0.5 0.4 0.8 0.6 0.5 0.4 0.8 0.7 0.5 0.4 17.0 15.0 9.6 7.1 18.5 17.3 10.8 7.9 728 696 675 635 24.4 34.1 28.2 28.1 26.8 34.4 27.1 27.1 27.9 33.1 26.4 26.2 1,344 1,370 2,125 2,743 1,464 1,577 2,389 3,059 1,181 1,153 1,744 2,272 4,713 5,866 7,611 9,883 1,563 1,542 2,354 3,026 4,424 5,049 6,729 7,973 0 0 0 0
Pre-tax Profit from Cont. Op. Income Taxes Profit from Continuing Op. Net Profit Net margin (%) Net Profit of Parent Net Profit to Non-Controlling Other Comprehensive Income Total Comprehensive Income
2011/12A 2012/12E 2013/12F 2014/12F 129 148 198 234 78.6 14.7 33.3 18.5 76 92 115 131 53 57 83 104 41.1 38.3 41.7 44.3 14 17 20 23 39 40 62 81 30.4 27.1 31.6 34.4 -5 -1 -1 -1 43 46 70 90 35 39 61 79 26.8 26.3 30.9 33.8 0 1 1 2 0 0 0 0 0 0 0 0 35 40 63 81 0 6 11 15 35 34 51 67 35 34 51 67 26.7 22.8 25.9 28.5 35 34 51 67 0 0 0 0 0 1 0 0 35 35 51 67
48
SFA (056190.KQ)
Company Analysis
May 7, 2012
Not Rated
CP (12/4/25) W51,500
Split off from Samsung Techwin in 1998, SFA is a comprehensive logistics equipment maker. Following its successful entry into the LCD industry in 2004 and OLED market in 2010, the company has emerged as Koreas number-one logistics equipment maker. SFAs operating margin stands at the 10%-levelthe lowest among IT equipment players. Enjoying a diverse portfolio ranging from logistics equipment to all IT processing equipment (PECVD and deposition), the companys margins should improve gradually going forward.
822)768-7585, young.park@wooriwm.com
SFA won OLED equipment orders worth W420bn in 2011 (orders related to SMDs A2 P2 and A2 P3 lines partially reflected). In 2012, new OLED equipment orders should surpass W500bn, given: 1) SMDs planned investment in its A3 line (144,000 sheets/month) in 2H12 (vs A2: 88,000 sheets/month); and 2) likely further orders for entire processing equipment in addition to logistics equipment. We also draw attention to the companys 8G OLED organic material deposition equipment, noting that SMS (currently under development) is likely to be adopted for mass production.
-9.2 -3.9
NP (Wbn) 18 56 76 97 117
ROE Debt/equity Net debt (%) (%) (Wbn) 8.0 15.5 28.4 25.6 24.9 35.6 83.8 62.1 na na -91 -181 -249 na na
Note: IFRS basis, but operating profit based on adjusted operating income (gross profit SG&A expenses); EPS, P/E and ROE excluding minority interests based on consensus Source: Woori I&S Research Center estimates
www.wooriwm.com
SFA
www.wooriwm.com
VALUATION INDEX
Price/Earnings (x) P/E (High, x) P/E (Low, x) Price/ Book Value (x) P/B (High, x) P/B (Low, x) Price/ Gross Cash Flow (x) Price/ Sales (x) P/E/ EPS growth (x) P/E/ EBITPS growth (x) P/E/ EBITDAPS growth (x) EV/ EBITDA (x) EV/ EBIT (x) Enterprise Value (Wbn) EPS CAGR (3-Yr) (%) EBITPS CAGR (3-Yr) (%) EBITDAPS CAGR (3-Yr) (%) EBITPS (won) EBITDAPS (won) Fully diluted EPS (won) BVPS (won) CFPS (won) Sales PS (won) DPS (won) 2008/12A 2009/12A 2010/12\A 2011/12A 6.0 16.9 22.4 12.3 14.1 27.8 24.0 14.4 3.5 13.9 7.3 9.1 1.4 1.3 3.3 3.1 3.1 2.2 3.6 3.6 0.8 1.1 1.1 2.3 5.4 13.2 10.2 9.1 0.7 1.0 1.4 1.5 0.3 0.2 0.5 0.9 0.3 0.2 0.8 0.6 0.3 0.2 0.9 0.7 3.3 10.8 9.9 8.4 3.6 14.0 10.6 8.9 190 213 699 846 21.3 72.5 40.9 14.0 20.9 95.5 27.0 19.6 20.3 82.6 25.9 18.3 2,981 846 3,686 5,274 3,231 1,100 3,951 5,627 2,773 1,004 2,192 4,943 12,404 12,715 14,704 19,845 3,092 1,283 4,800 6,679 23,995 17,103 35,224 41,960 1,400 400 500 1,280
Pre-tax Profit from Cont. Op. Income Taxes Profit from Continuing Op. Net Profit Net margin (%) Net Profit of Parent Net Profit to Non-Controlling Other Comprehensive Income Total Comprehensive Income
2008/12A 2009/12A 2010/12\A 2011/12A 431 307 632 753 40.4 -28.7 106.0 19.1 355 270 529 610 76 37 104 143 17.6 12.0 16.4 19.0 22 22 38 48 54 15 66 95 12.4 4.9 10.5 12.6 10 -1 4 -3 58 20 71 101 64 15 70 92 14.8 4.8 11.1 12.2 4 7 4 4 0 0 0 0 0 3 0 0 69 25 75 96 19 7 18 20 50 18 56 76 50 18 56 76 11.6 5.9 8.9 10.0 50 18 56 76 0 0 0 0 0 0 -2 -2 0 0 54 74
50
AP Systems (054620.KQ)
Company Analysis
May 7, 2012
Not Rated
CP (12/4/25) W11,650
AP Systems utilizes laser technology to manufacture OLED processing equipment. It is the only domestic company possessing a full range of processing capabilities (including TFT, deposition, and encapsulation processing equipment).
822)768-7585, young.park@wooriwm.com
Sector
Semiconductor
Kospi 1,961.98 Kosdaq 483.48 Market cap (common) W251.6bn Outstanding shares (common) 21.6mn shrs 52W high (11/08/03) W16,850 low (11/10/05) W10,150 Dividend yield (2011) 0.0% Foreign ownership 16.1% Major shareholders Gi-Ro Jung and four others Fid Series Emrg Mrkts Fund Share performance (%)3M Absolute Relative Price trend
200 150 100 50 0 '11.4 '11.6 '11.8 '11.10 '11.12 '12.2 '12.4 AP Systems KOSDAQ
-9.2 -3.9
OP (Wbn) 4 12 26 36 44
NP (Wbn) 2 -12 12 30 38
Debt/equity Net debt (%) (Wbn) 97.0 90.8 233.9 N/A N/A -1 6 4 N/A N/A
Note: IFRS basis, but operating profit based on adjusted operating income (gross profit SG&A expenses); EPS, P/E and ROE excluding minority interests based on consensus Source: Woori I&S Research Center estimates
www.wooriwm.com
AP Systems
www.wooriwm.com
VALUATION INDEX
Price/Earnings (x) P/E (High, x) P/E (Low, x) Price/ Book Value (x) P/B (High, x) P/B (Low, x) Price/ Gross Cash Flow (x) Price/ Sales (x) P/E/ EPS growth (x) P/E/ EBITPS growth (x) P/E/ EBITDAPS growth (x) EV/ EBITDA (x) EV/ EBIT (x) Enterprise Value (Wbn) EPS CAGR (3-Yr) (%) EBITPS CAGR (3-Yr) (%) EBITDAPS CAGR (3-Yr) (%) EBITPS (won) EBITDAPS (won) Fully diluted EPS (won) BVPS (won) CFPS (won) Sales PS (won) DPS (won) 2008/12A 2009/12A 2010/12\A 2011/12A 8.8 37.3 -11.8 26.1 18.7 62.6 -15.1 34.3 6.9 26.4 -6.5 15.6 1.1 1.3 2.5 3.5 2.4 2.2 3.2 4.5 0.9 0.9 1.4 2.1 4.5 5.6 17.2 7.4 1.8 0.8 1.1 1.3 1.0 0.3 N/A 0.2 0.1 0.3 -0.2 0.4 0.2 0.8 -0.2 0.4 23.7 6.4 10.1 9.3 104.4 21.6 14.6 10.8 96 77 169 284 8.5 138.0 -258.3 105.2 142.7 117.5 76.8 66.7 55.7 49.6 58.8 59.8 86 199 618 1,227 377 668 892 1,425 390 115 -645 497 3,084 3,306 3,057 3,763 770 764 444 1,758 1,901 5,147 7,131 10,337 0 0 0 0
Pre-tax Profit from Cont. Op. Income Taxes Profit from Continuing Op. Net Profit Net margin (%) Net Profit of Parent Net Profit to Non-Controlling Other Comprehensive Income Total Comprehensive Income
2008/12A 2009/12A 2010/12\A 2011/12A 20 92 134 222 -52.2 353.2 45.6 66.1 13 74 115 178 7 18 19 45 33.7 19.9 14.4 20.1 6 15 8 18 1 4 12 26 4.5 3.9 8.7 11.9 2 -1 -12 -1 4 12 17 31 3 2 -1 26 12.9 2.2 -0.6 11.6 0 -2 0 -1 0 0 0 0 0 0 0 -8 3 0 0 17 -2 -2 0 3 4 2 0 14 4 2 -12 12 20.5 2.2 -9.0 5.3 4 2 -12 12 0 0 0 0 0 0 0 -1 0 0 -12 11
52
Not Rated
CP (12/04/25 ) W27,600
Heat treatment technology is key in production of flexible OLED and oxide TFT
Secur heat treatment technology
Listed on the Kosdaq in Nov 2011, Tera Semicon specializes in batch-type heat treatment technology, utilizing its specialized processing equipment and knowhow to produce semiconductor, OLED, and solar cell equipment. The company displayed lofty top-line growth (up 197.9% y-y) in 2011OLED related sales jumped from W12.9bn in 2010 to W94.5bn in 2011, backed by increased investment at SMD.
822)768-7585, young.park@wooriwm.com
In 2012, Tera Semicon should enjoy order momentum for its heat treatment equipment in line with increased investment in flexible OLED and oxide TFT. Of note, curing equipment is required in order for flexible OLED to harden polyimide. Meanwhile, heat treatment equipment is used in the production of oxide TFT in order to stabilize IGZO material. Tera Semicon is currently in the process of developing super grain silicon (SGS) equipment. While SMD is highly likely to use ELA for its 8G line, it is also expected to purchase SGS.
6M N/A N/A
-8.0 -2.7
OP (Wbn) 0 7 11 36 48
NP (Wbn) 0 6 9 30 42
NP to parent (Wbn) 0 6 9 30 42
EPS (won)
Chg (%)
Note: IFRS basis, but operating profit based on adjusted operating income (gross profit SG&A expenses); EPS, P/E and ROE excluding minority interests based on consensus Source: Woori I&S Research Center estimates
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Tera Semicon
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VALUATION INDEX
Price/Earnings(x) P/E (High, x) P/E (Low, x) Price/ Book Value (x) P/B (High, x) P/B (Low, x) Price/ Gross Cash Flow (x) Price/ Sales (x) P/E/ EPS growth (x) P/E/ EBITPS growth (x) P/E/ EBITDAPS growth (x) EV/ EBITDA (x) EV/ EBIT (x) Enterprise Value (Wbn) EPS CAGR (3-Yr) (%) EBITPS CAGR (3-Yr) (%) EBITDAPS CAGR (3-Yr) (%) EBITPS (won) EBITDAPS (won) Fully diluted EPS (won) BVPS (won) CFPS (won) Sales PS (won) DPS (won) 2008/12A 2009/12A 2010/12\A 2011/12A 0.0 0.0 0.0 21.4 0.0 0.0 0.0 23.6 0.0 0.0 0.0 15.8 0.0 0.0 0.0 5.5 0.0 0.0 0.0 6.1 0.0 0.0 0.0 4.1 0.0 0.0 0.0 12.2 0.0 0.0 0.0 1.4 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 22.7 4.5 0.1 16.7 -17.4 25.0 0.1 19.4 5 4 1 221 231.2 450.0 117.8 194.5 -405.9 448.7 116.1 193.2 251.3 215.8 107.5 179.6 -55 26 1,315 1,580 42 147 1,512 1,833 35 21 1,053 1,281 1,308 1,325 2,332 4,978 139 154 1,523 2,256 1,666 2,003 8,223 19,404 0 0 0 0
Pre-tax Profit from Cont. Op. Income Taxes Profit from Continuing Op. Net Profit Net margin (%) Net Profit of Parent Net Profit to Non-Controlling Other Comprehensive Income Total Comprehensive Income
2008/12A 2009/12A 2010/12\A 2011/12A 9 11 47 140 -7.9 20.2 321.2 198.8 7 8 33 118 2 3 14 22 26.6 27.3 30.0 15.5 3 3 7 10 0 0 7 11 -3.3 1.3 16.0 8.1 2 0 0 0 0 1 9 13 1 0 8 12 14.1 3.4 16.4 8.3 -1 0 -1 0 0 0 0 0 0 0 0 0 0 0 7 11 0 0 1 2 0 0 6 9 0 0 6 9 2.2 1.1 12.8 6.6 0 0 6 9 0 0 0 0 0 0 0 0 0 0 6 9
2008/12A 2009/12A 2010/12\A 2011/12A 1 1 4 4 ROE (%) 5 4 6 7 ROA (%) 8 7 19 44 ROIC (%) 8 9 16 27 EBITDA/ equity (%) 0 0 2 3 EBITDA/ asset (%) 9 11 21 34 Dividend Yield (%) 17 18 40 78 Payout Ratio (%) 2 2 10 2 Total Cash Dividend (Wbn) 1 2 7 8 Cash DPS (won) 4 5 20 32 Net debt(cash)/ equity (%) 4 3 3 2 Debt/ equity (%) 0 0 0 0 Net interest exp/ sales (%) 4 4 4 6 Interest coverage (x) 8 8 24 37 Current Ratio (%) 2 2 3 4 Quick Ratio (%) 6 6 6 17 Total shares (mn) 1 2 10 19 Par value (won) 0 0 0 0 Share price (won) 9 9 16 40 Market Cap (Wbn)
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OLED Industry
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(won) 150,000 100,000 50,000 0 '10.4 '10.8 '10.12 '11.4 Closing price Target Price(12M) '11.8 '11.12
Company DS Hi-Metal
Code 077360.KQ
(won) 50,000 40,000 30,000 20,000 10,000 0 '10.4 '10.7 '10.10 '11.1 Closing price Target price(12M) '11.4 '11.7 '11.10 '12.1
Compliance notice
Woori Investment & Securities does not have a stake greater than or equal to 1% in companies mentioned in this material as of the preparation date Woori Investment & Securities has not provided this material to any institutional investors or other third party in advance. The Korean version of this material was distributed on Apr 26, 2012 The analyst and his/her spouse do not own any securities mentioned in this material as of the preparation date. Woori I&S is an issuer and liquidity provider of ELWs taking Cheil Industries, SFA as an underlying asset. SFA, AP Systems, and Tera Semicon are not under coverage at Woori I&S. Thus, Woori I&S does not present a rating, and target price on the counter. This material is for reference purpose only. This report correctly reflects the analysts opinion and was written without any external influence or intervention.
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