Hana Securities reported that a global shortage of optical components has already begun, and if domestic frequency auctions resume next year, OISolution's profitability is expected to improve significantly. The firm maintained its 'buy' rating and target price of 60,000 won.
Lee Sang-hoon, a researcher at Hana Securities, stated, "Following the U.S., the likelihood of frequency auctions in South Korea is high by mid-2027," adding, "Considering the trends in global raw materials, laser diode (LD) chips, and optical module supply, the shortage situation is expected to persist until the domestic auction date."
Hana Securities recently identified rising raw material costs for telecommunications equipment manufacturers as a sign of supply shortages. The global semiconductor and optical component supply shortages, driven by data center expansions, have spread to the telecommunications equipment market, causing prices for small-diameter indium phosphide (InP) wafers sourced from China to rise by over 40% to 70% compared to late last year.
However, OISolution produces its own LD chips, which analysts believe gives it an advantage in passing on cost increases to product prices compared to competitors. They anticipate that as global optical manufacturers focus their production capacity on server products, the shortage of LD chips and optical transceivers for base stations will worsen once the frequency auctions commence.
The researcher noted, "During the domestic auction in 2019, OISolution's gross profit margin and operating profit margin were at record highs of around 40% and 30%, respectively," explaining that even without internalizing LD chips at that time, the price increase of optical transceivers led to peak profit margins. He added, "At this point, with internalization achieved, we expect to achieve even higher profit margins."
OISolution's performance is also expected to improve. Hana Securities estimates that OISolution's operating loss will turn into a profit of 2.1 billion won this year, up from a loss of 16 billion won last year, and is projected to expand to 21.2 billion won next year. During the same period, revenue is expected to increase from 57.4 billion won to 77.4 billion won this year, and further to 126.7 billion won next year.
* This article has been translated by AI.
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