SK Securities reiterated its buy recommendation and target price of KRW 230,000 on TES (KOSDAQ: 095610), a South Korean semiconductor equipment maker, on the 14th, citing a near-doubling of new orders in the second quarter to KRW 282.3bn. The target implies upside of 58.6% from the closing price of KRW 145,000 on the 13th.

Second-quarter results beat on revenue, missed on profit

TES reported second-quarter revenue of KRW 123.7bn and operating profit of KRW 26.0bn, up 27% and 17% respectively from the previous quarter, and 51% and 28% higher than a year earlier. The revenue growth was driven by increased shipments of DRAM equipment to Samsung Electronics' Pyeongtaek P4 fab and SK Hynix's M15X facility, as well as higher sales of equipment related to NAND V8 technology migration.

Operating profit, however, fell 10.3% short of SK Securities's estimate of KRW 29.0bn. The broker attributed the miss to a worsening product mix — driven by a rise in shipments of ARC and general-purpose equipment — as well as one-off costs including research expenses and warranty provisions. The operating margin slipped to 21.0%, down from 22.9% in the first quarter.

The metric that matters: order backlog

The figure SK Securities highlighted most prominently was the trajectory of TES's order backlog. New orders surged from KRW 145.5bn in the first quarter to KRW 282.3bn in the second, pushing the end-of-quarter backlog above KRW 200bn. The broker believes the bulk of this backlog can be recognised as revenue within the year.

Demand shows little sign of easing. Orders related to Samsung's P4 Phase 4 expansion and SK Hynix's M15X are expected to remain strong in the third quarter, while NAND investment — from Samsung's Xi'an plant and its next-generation V9 technology — is forecast to add further orders in the second half.

SK Securities also highlighted a structural argument: over the past decade, TES's share price has tracked its order backlog closely. If the surge in backlog that began in the first quarter proves to be a sustained upward trend rather than a one-off, the broker argues, it could act as a decisive catalyst for a re-rating of the stock.

Full-year forecasts above consensus

SK Securities forecasts full-year 2026 revenue of KRW 491.0bn and operating profit of KRW 107.0bn — 6.0% and 4.9% above market consensus, respectively. The broker sees further scope for upgrades, noting that new product lines, including batch diffusion furnaces (BSD) and Tetra equipment, are expected to begin contributing to revenue in the second half.

Risks worth watching

Investors should note several caveats. TES's current share price sits 33.3% below its 52-week high of KRW 217,500, reflecting both the second-quarter profit miss and lingering uncertainty over the broader semiconductor equipment cycle. The stock trades at a forward price-to-earnings multiple of 27.5 times for 2026, a relatively rich valuation within South Korea's semiconductor equipment sector.

The conversion of backlog into booked revenue also depends on the pace of capital expenditure by Samsung and SK Hynix. Any slowdown in memory chip demand, or delays to customers' investment schedules, could push out the timing of revenue recognition. It also remains to be seen whether the one-off cost increases seen in the second quarter will prove transitory or signal a more persistent margin headwind — a question that third-quarter results will help to answer.

TES is a KOSDAQ-listed maker of thermal processing and deposition equipment used in front-end semiconductor manufacturing. Its market capitalisation stands at KRW 2.807tn. The founder and largest shareholder, Ju Sung-il, and eight related parties hold a combined stake of 29.46%; the National Pension Service of Korea holds 9.96%.