[Edaily Reporter Kim Hyung-il ] HYUNDAI MOTOR SECURITIES forecasts that NEO TECHNICAL SYSTEM CO., LTD(085910)will continue to benefit from a shortage of Microbit supplies and an expanding share of high-value-added printed circuit boards (PCBs). The firm maintained its “Buy (BUY)” rating and raised its target price by 24% from the previous level to 31,000 won.

On the 13th, Kim Jong-bae, an analyst at HYUNDAI MOTOR SECURITIES, noted that while the Microbit supply shortage persists, the product mix continues to improve due to the trend toward higher-layer-count PCBs. Consequently, he projected that the average selling price (ASP) of products will continue to rise. He assessed that the price increase could be even more significant if rising raw material costs are reflected in product selling prices.

Third-quarter earnings are estimated at 23.6 billion won in revenue and 5.0 billion won in operating profit. This represents year-over-year increases of 31.5% and 88.8%, respectively, with an expected operating profit margin of 21.0%. However, the firm believes these figures will fall short of previous estimates.

The analysis suggests that while Microbit will perform well due to rising prices and increased volume, the performance of shafts and lens polishers will be negatively impacted in the short term by exchange rate fluctuations. As equipment for expanding Microbit production capacity is being delivered sequentially, the effect of increased production volume is expected to materialize gradually.

Analysts noted that as there are no signs of the Microbit supply shortage abating, the need to expand production capacity is growing. While NEO TECHNICAL SYSTEM CO., LTD had planned to maintain production capacity at 72 million units through 2027, the company is now in a position where it must consider additional capacity expansions to meet rising demand. Production equipment continues to be delivered throughout the third quarter, and the company expects the increased production capacity to drive higher output in the fourth quarter.

The company also cited the expanding share of high-value-added products as a factor contributing to improved performance. It projected that product mix would further improve starting in the third quarter as demand for high-value-added PCBs for SoCAMM2 is reflected. Analysts note that since PCB shipments for SoCAMM2 are still in the early stages, the upward trend in average selling prices could accelerate as volumes increase in the future. With demand for high-value-added products—such as multilayer boards (MLB) and flip-chip ball grid arrays (FC-BGA)—remaining strong, the company anticipates that an expanded share of these products—combined with full production capacity—will strengthen its profit resilience.

HYUNDAI MOTOR SECURITIES assessed that, amid an ongoing cycle of rising demand within the artificial intelligence (AI) value chain, the PCB sector has outperformed the broader market index over the past two months. It noted that NEO TECHNICAL SYSTEM CO., LTD has also shown a rapid recovery since its July correction but remains 43% below its all-time high.

Analyst Kim assessed that NEO TECHNICAL SYSTEM CO., LTD.’s projected price-to-earnings ratio (P/E ratio) for next year is 12.7x, indicating that the stock is undervalued relative to global peers and within the AI value chain. The target price was calculated by applying a target multiple of 20.1x to next year’s projected earnings per share (EPS) of 1,536 won. The analysis suggests that, given the company’s strengthening fundamentals driven by expanding demand and an improved product mix, coupled with its discounted valuation relative to global peers, this represents a favorable opportunity to actively increase holdings.