Shinhan Investment & Securities raised its target price for Isu Petasys (KOSPI: 007660) by 6% to 170,000 won on the 22nd, while reiterating its "buy" recommendation. Based on the closing price of 110,300 won on 21st September, the implied upside is 54.1%.
In a research note published the same day, analyst Oh Kang-ho identified three key growth drivers: an expanding order backlog, the benefits of third-quarter capacity additions, and an improving mix of higher-margin products. The order backlog grew from 582.9bn won in the first quarter to 622.2bn won in the second (on a standalone Petasys basis), representing a 97% surge year-on-year.
Isu Petasys reported second-quarter revenue of 379.9bn won and operating profit of 77.1bn won, up 57.4% and 83.2% respectively from a year earlier, beating the market consensus operating profit estimate of 75.1bn won by 2.6%. The operating margin improved by 0.5 percentage points quarter-on-quarter to 20.3%.
Product pricing is also rising sharply. Based on production data disclosed in regulatory filings, the average selling price (ASP) in the second quarter is estimated to have climbed 21% year-on-year and 14% quarter-on-quarter. Revenue from data centre customers accounted for 72% of sales in the second quarter, up 8 percentage points from 64% in the same period last year. Conversely, the share of lower-margin server products shrank from 14% in the first quarter to 9% in the second.
Shinhan forecasts third-quarter operating profit of 94.8bn won, a 62% increase year-on-year. Projected revenue of 432.5bn won would set a new quarterly record, with both the capacity expansion and the improved product mix expected to contribute simultaneously.
On an annual basis, the brokerage projects 2026 revenue of 1.6096tn won (up 47.9% year-on-year) and operating profit of 339.2bn won (up 65.7%), representing upgrades of 5.6% and 6.9% respectively from prior estimates. The 2027 forecasts were revised up by even wider margins: revenue of 2.2154tn won (up 14.5% from the previous estimate) and operating profit of 512.1bn won (up 24.7%).
The revised target price was derived by applying a target price-to-earnings multiple of 30.7 times to the forecast 2027 earnings per share of 5,503 won. The target multiple represents a 5% premium to the three-year average (29.2 times) for 2023–2025, but was trimmed by 12% from the previously applied multiple to reflect a broader de-rating in global equity valuations. The net effect — higher earnings estimates offset by a lower valuation multiple — produced the modest 6% uplift in the target price.
The investment case rests on a structural supply shortage in the ultra-high-layer printed circuit board (PCB) market. Demand for high-layer, high-density boards is surging as AI data centres expand and network infrastructure is upgraded, but steep technical barriers are preventing supply from keeping pace. Isu Petasys is classified as South Korea's only dedicated ultra-high-layer PCB manufacturer with production capability based on multi-lamination (MultiLam/HDI) technology. Shinhan expects the revenue share of multi-lamination products to rise from 8% in 2025 to 30% in 2026.
Investors should nonetheless keep an eye on several risks. The share price has risen 42.7% over the past twelve months but is down 9.2% year-to-date, underperforming the KOSPI by 44.2 percentage points since the start of the year. A potential pullback in capital expenditure by global technology companies could weigh on the order backlog, capacity expansion could face delays, and the low foreign ownership rate of 15.3% leaves the stock vulnerable to sharp swings in supply and demand.
The financial position, however, is improving. The debt-to-equity ratio has fallen from 141.2% in 2024 to 70.5% in 2025, and is projected to decline further to 56.9% by 2026. A rights issue last year strengthened the balance sheet and took the company into a net cash position. The interest coverage ratio is expected to rise from 24.6 times in 2025 to 45.1 times in 2026.