On Thursday, Citi initiated coverage on Soulbrain Co Ltd (357780:KS) stock, a key supplier in the NAND memory sector, with a Buy rating and a price target of KRW250,000.
The new price target reflects a valuation based on a 12.6x target price-earnings (PE) multiple, which is a 10% discount to the five-year average 12-month forward PE multiple of 14x. This adjustment accounts for anticipated near-term earnings weakness.
The coverage by Citi highlights Soulbrain's position as the primary supplier of NAND etchants to Korean memory manufacturers. Despite current challenges in the market, such as subdued NAND end-demand and a slow recovery in capital expenditures from NAND producers, Soulbrain is expected to benefit from the long-term growth trend in NAND stacking technology.
Soulbrain's future prospects seem promising according to Citi's analysis, especially with the anticipated increase in market demand for server NAND with more than 300 layers (300L) and mobile NAND with over 200 layers (200L). The firm's strategic place within the industry is poised to capitalize on these advancements in memory technology.
While the company may not have immediate earnings catalysts, the coverage suggests a positive outlook for Soulbrain's role in the NAND sector's expansion. The anticipated structural increase in demand for advanced server and mobile NAND products is expected to drive growth for the company in the foreseeable future.
Investors and market watchers will likely monitor Soulbrain's stock performance and industry position closely, following Citi's optimistic initiation of coverage and the setting of a substantial price target for the company's shares.
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