[Click eStock] "Neotis Set to Benefit from SoCAMM Semiconductor Boom... Significantly Undervalued"

There are expectations that Neotis, a tool manufacturer for PCB processing, will continue its growth trajectory, bolstered by the expansion of the high-performance memory module SoCAMM market. Analysts suggest that, alongside ongoing supply shortages of its mainstay product, the Microbit, Neotis's expansion of high value-added router supplies for SoCAMM will accelerate a product mix upgrade.

On August 27, Yang Seungsu, an analyst at Meritz Securities, reported that Neotis’s consolidated revenue for the second quarter reached KRW 22.6 billion, up 43.5% year-on-year, and operating profit was KRW 4.5 billion, a 95.7% increase from the same period last year. The operating margin stood at 19.9%.

Operating profit exceeded Meritz Securities' previous estimates by 2.3%. The main driving force behind these improved results was the flagship product, Microbit. Microbit sales in the second quarter were KRW 10.6 billion, representing a 99.4% year-on-year increase. This reflected a simultaneous expansion in production capacity and an increase in average selling price.

Yang explained, “Major substrate customers succeeded in raising prices to end customers, which eased price resistance. In addition, a global supply shortage led to a reduction in the domestic allocation of overseas competitors, allowing Neotis to expand its share of high value-added products and core supply.” As a result, not only has shipment volume increased, but profitability has also improved due to product mix enhancement.

In the second half of the year, routers for SoCAMM are expected to emerge as a new growth engine. SoCAMM requires the use of high-performance routers, as substrate rigidity and copper-clad laminate (CCL) specifications are higher than those of traditional memory modules. Additionally, as substrate thickness increases, router wear accelerates, leading to an increased number of tools used per substrate.

Unlike drills, which process via holes in PCBs, routers are employed to cut substrate perimeters after components have been mounted. Since routers are used in the final processing stage, any processing defects can lead to losses affecting the entire finished product, making quality reliability crucial. Routers are also thicker than drills, require additional coating, and contain a higher tungsten content, classifying them as high value-added products with higher average selling prices.

Neotis is estimated to have secured around 70% market share in the domestic router market. In particular, Meritz Securities assessed that the company enjoys a dominant market share in the SoCAMM segment. In fact, since June, Neotis has begun exclusive supply of SoCAMM routers to domestic substrate makers.

Yang forecasts, “As front-end companies expand SoCAMM sales in the second half of the year, router shipments and product mix improvements will occur simultaneously, driving further business growth.”

Expectations are also high regarding Microbit's medium- to long-term growth potential. This is because not only is PCB production volume increasing, but the trend toward higher layer counts, larger substrates, and the transition to advanced materials means tool consumption per PCB is also rising.

Meritz Securities projects that, considering aggressive expansions at substrate makers and increased processing complexity due to higher-end products, the tight supply of Microbit is likely to persist for at least the next two to three years. Accordingly, Neotis’s Microbit sales are expected to rise from KRW 48.7 billion this year to KRW 92.5 billion next year—an increase of approximately 90%.

The overall business outlook is also positive. Meritz Securities forecasts Neotis’s full-year revenue and operating profit at KRW 94.5 billion and KRW 17.5 billion, respectively, for this year. Next year, these figures are expected to rise to KRW 151.7 billion and KRW 31.1 billion, respectively—up 60.5% and 77.8% from this year. The operating margin is also expected to improve from 18.5% this year to 20.5% next year.

Yang concluded, “Based on estimates, Neotis’s current share price represents a 2027 PER (price-earnings ratio) of 7.9 times, which is significantly lower than that of global peers. We therefore expect the valuation gap to narrow going forward.”

This content was produced with the assistance of AI translation services.