SEOUL -- AP Systems stands to benefit from rising orders for its organic light-emitting diode equipment from its key client, Samsung Electronics, as well as customers from China as the panel display industry experiences a structural shift from liquid crystal displays, analysts said on Wednesday.
Nomura said that AP Systems remains its top pick given high entry barriers for potential competitors, high OLED exposure, and diversifying customer and product mixes.
"We think AP Systems is the best pure OLED equipment play given its 100% market share in Samsung for key OLED process equipment and dominant market share in China," said Chris Chang, a Nomura analyst. "Its 95% plus revenue contribution from OLED equipment is [the] highest among peers."
The expectation came after AP Systems won a series of OLED equipment orders from Chinese companies. AP announced on Monday that it had $60.3 million in orders from Wuhan China Star Optoelectronics Semiconductor Display Technology, following a $47.3 million order from Mianyang BOE Optoelectronics Technology a month ago.
Demand for OLED screens is rising among smartphone makers. Apple unveiled its first iPhone with an OLED screen, the flagship iPhone X, earlier this month. Samsung Electronics has used OLED for its Galaxy series in recent years, and LG Electronics has used it for its new V30 smartphone.
Despite these positive signs, AP Systems saw its shares fall 3.52% to 39,750 won on Wednesday following a 3.17% loss the previous day due to concerns that OLED equipment orders may peak this year. The benchmark KOSPI dropped 0.16% to 2,412.20 in the same period, unaffected by President Donald Trump's threats to destroy North Korea.
Kwon Hyul, an analyst at Dongbu Securities, said that the stock price for AP Systems is undervalued. "We believe that valuation is excessively underestimated, considering it is expected to win more new orders with OLED investment cycle," said Kwon.
AP Systems posted 384.2 billion won ($340.4 million) in sales for the second quarter, up 204.1% quarter on quarter. Year-on-year data is not available since the company relisted on the KOSDAQ in March, splitting from APS Holdings. Operating profit jumped 135.5% to 29.7 billion won during the same period. Net profit reached 23.1 billion won in April to June, up 151.9% from the previous quarter.