[Edaily Reporter Kim Hyung-il ] Meritz Securities forecasts that SUNGHO ELECTRONICS CORP.(043260)will see a full-scale improvement in earnings driven by an increase in orders for optical communication equipment due to the growth of the AI data center market and the normalization of component supply. In particular, with the growth of its subsidiary ADS Tech standing out, the firm predicts that ADS Tech will account for the majority of SUNGHO ELECTRONICS CORP.’s consolidated operating profit next year.

On the 3rd, Yang Seung-soo, an analyst at Meritz Securities, projected SUNGHO ELECTRONICS CORP.’s revenue for next year at 162.5 billion won and operating profit at 74.8 billion won. These figures represent year-over-year increases of 221.8% and 181.7%, respectively. The analysis suggests that revenue and profitability will improve significantly as demand for equipment upgrades driven by the shift to higher-speed optical transceivers aligns with the company’s entry into new segments within the optical communications market.

In the short term, resolving the supply shortage of stages—a key component—is crucial for a recovery in earnings. In the first half of this year, ADS Tech posted revenue of 18.8 billion won and operating profit of 6.3 billion won, recording an operating profit margin of 33.5%. Earnings were weak due to delayed product shipments caused by the stage supply shortage, compounded by one-time costs related to the acquisition.

However, the component supply situation is expected to gradually improve. A Japanese stage supplier has announced plans to double its production capacity, and the supply shortage is expected to be gradually resolved starting in December. ADS Tech has also secured a new stage supplier in Taiwan, diversifying its supply chain.

Researcher Yang stated, “In contrast to the weak earnings caused by the component shortage, new orders continue to come in steadily, driven by robust demand in the Chonbang optical communications market,” adding, “Cumulative orders for the third quarter are estimated at approximately 80 billion won and are expected to increase to around 100 billion won by the end of the year.”

The earnings rebound is expected to gain momentum starting in the second half of the year. As shipments recover due to normalized component supply and existing order backlogs are converted into revenue simultaneously, ADS Tech’s second-half revenue is estimated to reach 33.8 billion won, with operating profit rising to 12.8 billion won. The operating profit margin is projected to reach 37.9%.

The medium- to long-term growth driver is demand for optical communication equipment stemming from the network upgrades of AI data centers. As existing optical transceiver customers transition from 800G to 1.6T, new equipment orders are gaining momentum. Coupled with the acquisition of new customers, the order base is expanding.

Particular attention was paid to the expansion of supplies to key customers in North America. Due to a competitor’s failure in quality certification testing, the company currently holds an exclusive supply contract with that customer; furthermore, driven by increased demand for co-packaged optics (CPO), equipment shipments next year are expected to more than double compared to this year.

Next year, scale-up CPO is expected to be proactively introduced into the Vera Rubin-based Oberon rack. ADS Tech is also understood to be in the early stages of developing related equipment. Analysts suggest that if the adoption of scale-up CPO expands as the company transitions to the Feynman platform-based Kyber rack, this could serve as an additional growth driver.

Demand for alignment equipment related to Fiber Array Units (FAUs) is also on the rise. Shipments of equipment to North American fiber optic companies are scheduled to begin in earnest starting this December, and the company has reportedly secured new orders from a Taiwanese lens manufacturer preparing to enter the FAU market.

Researcher Yang stated, “The growth trend in equipment shipments will continue in the medium to long term as demand for equipment replacement driven by the increasing speeds of existing optical transceivers aligns with new market entries related to CPO and FAU.” He added, “Since the majority of SUNGHO ELECTRONICS CORP.’s consolidated operating profit is expected to be generated by ADS Tech starting next year, the company is now entering a phase where its transformation into a semiconductor equipment manufacturer for AI data centers is gaining momentum.”