[KOSDAQ STAR] SK Materials benefits from semiconductor, display boom

This is the 37th in a series of articles analyzing major companies traded on the tech-heavy Kosdaq market. -- Ed



SK Materials, a semiconductor materials company, is one of the top 10 caps on the tech-heavy Kosdaq bourse with more than 1.8 trillion won ($1.59 billion) in market capitalization.

Since November 2015 when it became part of SK group, South Korea’s third-largest conglomerate, its share price has soared from slightly over 100,000 won to 171,000 won when it closed Friday.

The company was founded in 1982 and was called OCI Materials before it was taken over by SK Holdings. 

SK Materials produces special gases used in semiconductor, liquid-crystal display and solar cell manufacturing processes. Its gas product portfolio includes nitrogen trifluoride (NF3), making up 40 percent of the worldwide market.

Some analysts said the merger has created synergy and the company is also benefiting from the recent semiconductor and display boom.

This year, semiconductor companies are expected to continue upgrading their production facilities and 3-D NAND flash memory chips, while display makers will expand their capacity next year.

To meet the surge in demand, the specialty gas producer announced last year a plan to expand its NF3 production facility. Once completed by November 2018, the company will add 2,500 tons of NF3 production capacity to the current 8,600 tons.

SK Materials said it reported 461.4 billion won in sales and 154.1 billion won in operating profit in 2016, an increase of 36.5 percent and 36.6 percent, respectively, from the previous year.

This year, the company is expected to see 560 billion won of sales, up 21 percent on-year, and 185 billion won of operating profit, according to an estimate by financial group Daewoo Mirae Asset early this month.

On Friday, the share price of SK Materials closed at 171,000 won, down 0.98 percent from the previous session. It has been on a downward trend since its share price hit 199,900 won on Feb. 2.

It coincided with the announcement of its fourth-quarter results, which saw a 1.1 percent decline in operating profit on-quarter and lower than analysts’ estimate of about 5 percent on-quarter growth. Its share price has gradually declined.

Some analysts pointed out investors took profit-taking on stocks of semiconductor-related companies, which has seen an increase in recent months. The company’s share price was boosted following the announcement of its buyback plan of 530,000 shares or 5 percent of total shares on Dec. 19.

Downward pressure on the company stems partly from how its portfolio is heavily reliant on NF3, which accounts for 70 percent of the company’s sales. Prices for NF3 have been declining since the fourth quarter of 2016.

SK Holdings, which holds 49.1 percent of SK Materials, pledged to grow SK Materials as a semiconductor materials manufacturer with a diversified portfolio. 

By Park Ga-young (gypark@heraldcorp.com)