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Earnings and momentum are improving

Raise TP to W59,000

Raise TP to W59,000

• We derived our target price on Duksan Neolux by applying a P/E of 30x (unchanged) to our 12-month forward EPS.

• While end-market demand bears close watching, we believe oversupply in the display industry (including OLED) is gradually easing, driven by aggressive production cuts.

• Historically, OLED up-cycles began with improvements in LCD supply/demand conditions, which led to higher LCD panel prices and thus increased adoption of OLED (an alternative to LCD). And improvements in OLED demand have typically prompted end-market customers to execute new capex.

• Currently, the industry rebound is being driven by extreme supply cuts (shutdowns and utilization adjustments) rather than any meaningful pickup in demand. As such, we believe it will take some time before we see a significant capex cycle.

• That said, Samsung Display’s recent decision to invest in 8.6G OLED (IT-use from 2024) has brightened the medium/long-term demand outlook. We believe Duksan Neolux?which was proactive in developing new products during the industry down-cycle?will enter a period of full-fledged earnings growth in 2024.


1H23 marked a low point for earnings; significant improvement likely in 2H23

Worst is already over

• For 2023, we forecast revenue of W171.8bn (-3% YoY) and operating profit of W31.3bn (-30% YoY). We expect earnings to improve materially in 2H23 on the back of peak-season effects.

• For 2H23, we expect revenue of W103.7bn (+52% HoH) and operating profit of W24.1bn (+236% HoH).


Momentum is growing; maintain as our top pick

Catalysts: IT-use OLED, wider application of black PDL, China material set, and QD

• The IT-use OLED market should see meaningful growth, with increases in area and thickness (tandem structure) supporting volume expansion. We expect Duksan Neolux to benefit from the market share gains of major customers.

• We see a number of additional growth catalysts in the medium and long term, including the potential expansion of black PDL applications later this year and a Chinese customer’s selection of a new material set. We maintain the stock as our top pick in display.