Simtech (KRX: 222800) announced on 25th August 2026 a ₩274.2bn (approximately $200m) capital expenditure programme — the largest single investment the company has made since its founding. The following day, Hana Securities reaffirmed its Buy rating and target price of ₩170,000 per share.
The spending is directed at two priorities: constructing a dedicated factory for SOCAMM (Small Outline CAMM) module substrates used in AI servers, and expanding production capacity for high-layer-count MSAP (Modified Semi-Additive Process) package substrates. Mass production is scheduled to begin in the first quarter of 2028.
Breaking down the investment by segment: ₩145.9bn goes to the module PCB (HDI) division, raising monthly production capacity by 52.2% from 4,600 to 7,000 square metres — a figure that includes the cost of land and buildings for the dedicated SOCAMM plant. A further ₩105.1bn is earmarked for the MSAP package substrate division, lifting monthly capacity by 11.1% from 45,000 to 50,000 square metres. The remaining ₩23.2bn is allocated to System IC substrates, funding Cu Post technology development and tripling RF-SiP production capacity from 400 to 1,200 square metres per month.
Conviction despite slack capacity
The decision is striking given that Simtech's package substrate utilisation rate was running in the high-70% range as of the second quarter of 2026 — well short of full capacity. Hana Securities interprets this pre-emptive move as a bet on a multiplier effect: as SOCAMM adoption by AI-server makers accelerates, demand for memory package substrates more broadly — including multi-chip package (MCP) substrates — is expected to follow.
To put the scale of this commitment in context, Simtech's previous largest single investment was ₩107.1bn for its ninth factory expansion in 2021. The current programme is more than double that figure. While the company has steadily expanded MSAP capacity since 2018, building an entirely new, dedicated SOCAMM facility on a separate plot of land is unprecedented for Simtech.
Financing uncertainty clouds the near term
How Simtech will fund the investment remains the principal source of short-term uncertainty. The company stated it would draw on internal reserves or external financing, and explicitly ruled out a rights issue. Hana Securities considers the issuance of convertible bonds (CBs) the most likely scenario.
Assuming, conservatively, that the full ₩270bn is raised via CBs at the current share price of ₩116,900, approximately 2.31m new potential shares would be created. Adding the roughly 2.32m shares that could arise from conversion of the existing seventh-tranche CB (worth ₩50bn), total fully diluted shares would reach approximately 42.09m. On that basis, applying Hana Securities' forecast of ₩394.5bn in net profit attributable to controlling shareholders for 2027, the fully diluted price-to-earnings ratio rises to around 12.5 times — higher than the pre-financing multiple of 11.1 times.
Earnings recovery is steep
Dilution concerns aside, Simtech's operational recovery is moving quickly. The company swung from an operating loss of ₩47bn in 2024 to a slim operating profit of ₩11.9bn in 2025. Hana Securities forecasts operating profit will surge to ₩258.5bn in 2026 — a year-on-year increase of 2,076% — before rising further to ₩472.2bn in 2027. Quarter by quarter, operating profit has already climbed sharply, from ₩13.7bn in the first quarter of 2026 to ₩62.8bn in the second, with further improvement expected through the rest of the year.
Key risks to watch
Investors should monitor two principal risks. First, the pace of ramp-up matters enormously. Although production is due to begin sequentially from the first quarter of 2028, the actual utilisation rate will determine how much upside is added to profit estimates. SOCAMM demand is ultimately tied to the pace of AI-server market growth, making the platform-transition schedules of major GPU vendors such as Nvidia and AMD a critical variable.
Second, CB conversion creates an overhang risk. Under the existing seventh-tranche CB, approximately 510,000 new shares were due to be listed on 27th August 2026, with Simtech Holdings retaining a call option on 33% of that tranche. Any additional CB issuance would introduce further potential selling pressure once conversion occurs.
Valuation
Hana Securities sees roughly 45% upside from the 25th August closing price of ₩116,900 to its target of ₩170,000. Simtech's shares climbed as high as ₩157,300 during the past 52 weeks, buoyed by optimism over AI-server exposure, but have since retreated below that peak.