Samsung Electro-Mechanics Stock Price Drops Significantly... "Rational Approach Needed"

Samsung Electro-Mechanics Stock Price Down 24% as of 14th Compared to January High This Year
MLCC and Package Substrates Expected to Drive Long-Term Structural Growth

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] An analysis has emerged that the stock price decline of Samsung Electro-Mechanics is excessive. It appears to have entered a mid- to long-term structural growth phase due to the multilayer ceramic capacitor (MLCC) and package substrate sectors.

According to Hana Financial Investment on the 19th, Samsung Electro-Mechanics' stock price has fallen 26% from its peak in January this year. The stock price, which rose to 223,000 KRW in January, recently broke through the 180,000 KRW and 170,000 KRW levels consecutively this month and is now moving in the 160,000 KRW range.

The analysis suggests that the stock price decline reflected the sluggish business conditions in advance. Kim Rok-ho, a researcher at Hana Financial Investment, explained, "Stock prices reflect business conditions in advance, and the 2018 case, where the stock price peak almost coincided with the earnings peak, is a representative example," adding, "Samsung Electro-Mechanics formed its peak in July-August 2018." This means that the earnings were reflected in the stock price 2-3 months before the quarterly earnings were confirmed at the end of October 2018.

Although there is uncertainty about demand in the third quarter, there is also a possibility that earnings will increase. Researcher Kim said, "In the current business environment without accompanying price increases, it is unlikely that volume will decrease in the third quarter compared to the second quarter," and "there is a high possibility that earnings will rather increase." The order backlog amount in Japan is also too different from the previous quarter, making it difficult to switch to a decrease in just one quarter.

Above all, MLCC and package substrates are expected to create mid- to long-term structural growth for Samsung Electro-Mechanics. MLCC is raising earnings expectations by stabilizing its operating profit margin at 20% through a fundamental level-up. The trend of increasing per-unit mounting of MLCCs in 5G smartphones and automotive electronics is also valid. Package substrates are experiencing a structural increase in demand despite a shortage of demand centered on high value-added products. Researcher Kim said, "Considering various situations, the current stock price decline is excessive," and "it is necessary to approach it rationally."