[Click eStock] "Samsung Electro-Mechanics, Q2 is the Bottom... Operating Profit to Increase by 50% in the Second Half"

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating on Samsung Electro-Mechanics on the 3rd and raised the target price by 10% from the previous level to 155,000 KRW. This is based on the judgment that operating profit in the second half of the year could increase by about 50% compared to the first half.

Samsung Electro-Mechanics is expected to record sales of 1.7722 trillion KRW in the second quarter, down 20% from the first quarter. Sales from business units excluding components are expected to decline compared to the first quarter due to deteriorating performance of smartphone-related parts. The operating profit of Samsung Electro-Mechanics in the second quarter is expected to be 100.9 billion KRW, down 38.7% from the previous quarter. Operating profit from business units excluding components is also estimated to decrease compared to the first quarter.

However, a significant improvement in performance is expected in the second half compared to the first half. Operating profits across all business units are anticipated to improve substantially. Kim Unho, a researcher at IBK Investment & Securities, said, “The substrate business unit will see significant improvement as RF-PCB (rigid-flexible printed circuit board) volumes from overseas clients begin in earnest,” adding, “The module business unit expects new product launches from domestic clients and increased volumes from overseas clients.”

Recently, the rise in Samsung Electro-Mechanics’ stock price is judged to reflect expectations for performance improvement in the second half rather than the weak second quarter. Although it is somewhat early to gauge the extent of the second half’s performance improvement, better-than-expected results are also possible. Researcher Kim Unho explained, “The performance slump caused by COVID-19 will conclude in the second quarter,” and added, “We believe there is additional potential for stock price increases.”