Korea Information Technology 15 February 2016 CrucialTec (114120 KS) CrucialT ec Target price: KRW24,000 Share price (15 Feb): KRW12,250 | Up/downside: +95.9% Initiation: a turnaround at its fingertips Benefiting from strong demand/tight supply for fingerprint sensors Kevin Jin (82) 2 787 9168 Entry of new competitors should be limited, at least in 2016
[email protected] Initiating with a Buy (1) rating and TP of KRW24,000; rerating likely Investment case: We see CrucialTec as an earnings recovery play for Share price performance 2016, following a switch in its business model at end-2013 which saw it (KRW) (%) move from being solely an optical trackpad (OTP) supplier for Blackberry to 17,000 190 becoming a fingerprint sensor (FPS) module supplier for some of China’s 15,000 165 leading smartphone makers (eg, Huawei, Meizu and OPPO Electronics). 13,000 140 11,000 115 Given the rising demand for FPS modules globally, we forecast the FPS 9,000 90 penetration rate among the top-10 China smartphone brands to rise from Feb-15 May-15 Aug-15 Nov-15 14-15% for 2015 to 30-35% for 2016, which would lead to tight supply and CrucialTec (LHS) Relative to KOSPI (RHS) strong demand for FPS modules in 2H16, pushing CrucialTec’s utilisation rate to close to 100% by the end of 2016, on our estimates. It should also 12-month range 9,190-17,000 result in a 4,591% rise in CrucialTec’s net profit, as the company is one of 2 Market cap (USDbn) 0.28 global leaders in this hard-to-enter segment of the smartphone value chain.