[Click eStock] "Samsung Electro-Mechanics Expected to Achieve Record-Breaking Second Half Performance"

Q3 Earnings Exceed Consensus Despite Semiconductor Supply Shortage
NH Investment & Securities "Maintain Samsung Electro-Mechanics Target Price at 250,000 Won"

[Asia Economy Reporter Gong Byung-sun] Despite the semiconductor supply shortage, Samsung Electro-Mechanics posted third-quarter results this year that exceeded market consensus. It is expected to record the highest-ever second-half performance if the decline in profits is limited through the expansion of high value-added multilayer ceramic capacitor (MLCC) products.

According to NH Investment & Securities on the 28th, Samsung Electro-Mechanics' third-quarter sales this year increased by 17.52% year-on-year to 2.6887 trillion KRW, and operating profit rose by 51.36% during the same period to 457.8 billion KRW. These figures exceeded the respective consensus estimates by 5.06% and 8.63%.

Despite adverse factors, the third-quarter results showed positive outcomes. The semiconductor supply shortage caused a slowdown in supply and demand in the upstream industries. However, margin improved due to the expansion of MLCC volume and better sales. In fact, the operating profit margin in the third quarter improved by 3.3 percentage points from the previous quarter to 17%. Additionally, the favorable trend in the packaging substrate market also acted as a positive factor.

There are forecasts that the fourth-quarter results may be somewhat sluggish. This is because demand for major upstream industries such as PCs and TVs is slowing down, and inventory adjustments for smartphones in the Greater China region are also expected. The consensus for Samsung Electro-Mechanics' fourth-quarter sales and operating profit is estimated to decline slightly to 2.4131 trillion KRW and 362.8 billion KRW, respectively. However, an increase in the average blended price due to the expansion of high value-added MLCC products in industries such as industrial and automotive sectors is anticipated. This is expected to limit the decline in profits.

Researcher Lee Kyu-ha of NH Investment & Securities explained, “In the mid to long term, additional performance expansion is possible through server packaging substrate deliveries and automotive MLCCs,” and recommended, “We advise taking the recent stock price adjustment as a buying opportunity.”

Accordingly, NH Investment & Securities maintained a ‘Buy’ rating and a target price of 250,000 KRW for Samsung Electro-Mechanics. The closing price on the previous day was 159,000 KRW.