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[Kosdaq Star] Amotech’s technical expertise in materials brightens growth prospects

This is the 30th in a series of articles analyzing major companies by market capitalization traded on the tech-heavy Kosdaq market. -- Ed

Market watchers have their eye on Amotech, a leading firm in the integrated part materials field, as its long-term growth prospects look bright with the backing of outstanding capabilities to develop new materials.

Founded in 1994, the company’s technical expertise has been strengthened in light of the development of the country’s telecommunication products, information technology-based home appliances and energy-related products. It owns a total of 549 domestic and overseas patents, as of January.  

Amotech’s headquarters in Incheon (Amotech)
Amotech’s headquarters in Incheon (Amotech)

Amotech’s key business areas are ceramic chips for IT products, chip antennas for wireless communication devices and brushless direct current motors for eco-friendly vehicles. 

The versatile company recorded 61.4 billion won ($51.8 million) in sales and 7.2 billion won in operating profit in the third quarter of this year, outperforming market forecasts.

Sales of car-related products helped drive the company’s operating gains-to-revenue ratio, which stands out as a new driver of growth in the long run. Amotech’s shares, however, have been experiencing ups and downs throughout the past year since hitting an all-time-high of 22,700 won ($19.20) on Dec. 8, 2015. The stock is gradually recovering since it nose-dived to 14,200 won on Oct. 12.

“In the long run, Amotech’s competitiveness stems from material development capabilities,” said Park Won-jae, an analyst at Mirae Asset Daewoo.

“The company has its original materials that are used for core components of IT products for everyday use, which will give them a competitive edge in being a leader in the component industry.”

The analyst pins high hopes on sales increase from the automobile sector, estimating that the company’s car-related parts sales will grow to 50 billion won in 2016 from 25 billion won last year.

“The firm is shifting its focus from the smartphone-based business to other industrial sectors including automobiles,” Park said. “The company is expected to have more than 10 automobile clients next year, up from the current three as they are planning to expand the type of auto parts.”

Amotech’s motors are currently being applied to radiator cooling fans, in-car sensors, battery cooling fans, air purifiers, electric water pumps and light-emitting diode cooling fans in automobiles. Its antennas are also being used to increase connectivity in cars, enabling safer and more informative driving.

Another cash cow for Amotech will be electric shock protectors next year, some analysts have said.

The electric shock protector, developed by Amotech for the first time in the world, is a component made of the firm‘s ceramic chip that protects smartphone users from potential electric shocks while using phones with cases made of metal, according to the company.

“After Samsung Electronics’ explosion debacle with its new Galaxy Note 7 smartphones, electronics makers around the world are more aware of the safety issue, which might help bring increased demand for Amotech products,” said Choi Joon-young, an analyst at NH Investment & Securities. Considering new demand from the smartphone market, the analyst forecast gradual improvements in the company’s performance for the next two years, a 6.6 percent increase in operating profit in 2017 and around 19 percent growth in 2018. 

By Song Su-hyun (