[Kosdaq Star] Innox to gain momentum from Apple’s switch to OLED displays

Information technology material provider Innox, which is worth 15 billion won ($13.4 million), is performing well this year and is expected to do even better, as global electronics makers are turning to organic light-emitting diode display panels.

Founded in 2001, Innox produces OLED materials, including adhesive films for flexible OLED display panels that are used to reinforce the panel boards, as well as circuit and semiconductor materials. The company used to rely heavily on the circuit materials for traditional electronic devices, with about 88 percent of its sales coming from those materials, until three years ago. The most well-known circuit material is the FPCB, or flexible printed circuit board, a very thin and flexible bending board that replaces the existing rigid printed circuit board. 

But recently, the firm’s business portfolio has been leaning toward materials for cutting-edge mobile and wearable devices.

Innox is the only provider in Korea of a full lineup of semiconductor circuit materials designed to project semiconductor chips in electronic devices, which is called PKG processing in the chipmaking industry.

Since the company is a major contractor of Samsung Electronics, SK hynix and LG Display, its business is highly affected by these players’ performance. In 2014, Innox experienced a slowdown in its sales as Samsung suffered contracted demand for new smartphones and tablet PCs.

The Kosdaq-listed company swung back into the surplus in the first quarter of this year and posted 3.8 billion won in operating profit in the second quarter, showing a whopping 493 percent jump from a year earlier.

It is forecast to obtain higher earnings in the coming months and next year, according to market analysts, as global demand for semiconductor materials and OLED display panels is on the rise.

“As the company’s sales from the semiconductor and OLED materials are expected to balloon to 39 percent of its total sales, it is forecast to materialize the most noticeable growth in the coming years,” said Kim Sang-pyo, an analyst at KB Investment & Securities.

According to the analyst, there are three factors that will contribute to the growth of Innox in 2017: higher demand for semiconductor materials such as die attachment film known as DAF; shipments of large-size OLED display panels more than doubling; and Apple’s switch to OLED displays.

“As (there is) demand for OLED displays that are larger than 65 inches, the company is reportedly expanding production facilities for OLED materials,” Kim said. “And as Apple has turned to OLED, its supply chain for displays may be focused on Korea. The company could supply newer display materials to the iPhone maker in the near future.”

Innox is projected to see its biggest earnings -- 8 billion won -- in the upcoming third quarter, since the third quarter of 2013, the analyst said. He raised the target price for the company to 25,000 won and kept the buy position for investors.

Its shares were traded at 17,350 won on Monday, up 0.29 percent from the previous trading session, according to tge Korea Exchange.

As LG Display is planning to ramp up its production of OLED TV display panels by 65 percent to 1.5 million units in 2017, Innox’s OLED business is estimated to grow about 40 percent next year, said Lee Won-sik, a researcher at Hana Financial Investment.

“It could gain more, if LGD decides to increase investments in the OLED sector,” Lee said.

By Song Su-hyun (song@heraldcorp.com) 

This is the 23rd in a series of articles analyzing major companies by market capitalization traded on the tech-heavy Kosdaq market. -- Ed