[Click eStock] “Samsung Electro-Mechanics to Resolve Supply Issues Starting Q2 Next Year”

Analysis Suggests Uncertainties Like Supply Issues Already Reflected in Stock Price
Cape Investment "Samsung Electro-Mechanics Target Price Raised from 170,000 KRW to 220,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Samsung Electro-Mechanics is entering its seasonal off-season amid global supply chain issues. However, these related problems have already been reflected in the stock price, and demand is expected to recover from the second quarter of next year.

On the 26th, Cape Investment & Securities maintained its "Buy" rating for Samsung Electro-Mechanics. Additionally, the target stock price was raised from the previous 170,000 KRW to 220,000 KRW. The closing price on the previous day was 178,000 KRW.

In the short term, the outlook is not favorable for Samsung Electro-Mechanics. The fourth quarter of this year is the company's seasonal off-season, with customers expected to adjust year-end inventory. While industrial demand such as servers remains solid, sets like PCs and TVs have experienced component supply issues, and there is a high possibility of demand slowdown. A decline in performance compared to the previous quarter is inevitable across all sectors, including multilayer ceramic capacitors (MLCC).

However, Cape Investment & Securities analyzes that these uncertainties have already been priced into the stock. Researcher Park Sung-soon of Cape Investment & Securities stated, "Component supply issues and demand uncertainties remain risk factors until the first quarter of next year, but we believe they have already been sufficiently reflected in the stock price," adding, "MLCC and substrates are expected to maintain a solid supply situation next year, creating a favorable environment for profitability."

Supply-related issues are expected to be resolved from the second quarter of next year. Demand for sets such as PCs and TVs is also expected to improve. Furthermore, MLCC is anticipated to see an increase in average selling price (ASP) due to expanded supply for 5G and automotive applications. Packaging substrates are expected to see improved profitability following the discontinuation of the flexible printed circuit board (FPCB) business.

Accordingly, Cape Investment & Securities estimates Samsung Electro-Mechanics' sales next year to increase by 2.5% compared to this year, reaching 10.2 trillion KRW, and operating profit to grow by 8.9% to 161.9 billion KRW during the same period.