"D-RAM Price Rebound and Supply Chain Issue Easing... IT Sector Optimism Expected"

Daishin Securities Report
Samsung Electro-Mechanics and MCNEX Recommended as Top Picks

[Asia Economy Reporter Minji Lee] There is a forecast that stock prices in the electrical and electronics sector are expected to rise this month due to improvements in key semiconductor indicators and the easing of supply disruption issues.

On the 6th, Daishin Securities anticipated a favorable wind for the IT sector this month, stating, “Starting with the rebound in DRAM spot prices, positive issues and environments centered on semiconductors and smartphones, including Samsung Electronics’ increase in smartphone sales in Q4, are emerging, leading to an optimistic outlook for the IT sector’s stock price rise in the first half of next year.”

Currently, the semiconductor industry is placing weight on the possibility of an increase in fixed DRAM prices in Q2 next year due to the rebound in DRAM spot prices. DRAM spot prices rebounded, and the fixed price in November maintained a steady level compared to expectations. Although fixed DRAM prices were expected to continue declining from October, November recorded a steady price. Spot prices fell 40% from $5.3 on March 22 this year to $3.168 on the 22nd of last month, but showed a rebound, reaching $3.301 on the 2nd of this month, a 4.2% increase from the bottom. Kangho Park, a researcher at Daishin Securities, explained, “The delay in the transition to with-COVID compared to expectations, strong demand for servers, steady demand for mobile DRAM, and easing of supply disruption issues suggest that IT companies have been accumulating inventory.”

Samsung Electronics’ smartphone sales are also showing an upward trend. This year, Samsung Electronics’ smartphone sales are expected to reach 71.87 million units, exceeding the previous estimate of 66.99 million units, representing a 3.4% increase compared to the previous quarter. Both foldable phones and sales of the Galaxy S21 and Galaxy A series performed well. Samsung Electronics’ smartphone sales in 2022 are estimated to increase by 8.5% compared to this year, reaching 300 million units. The increase in foldable phone sales and the expansion of the premium segment (within the Galaxy S22 and Galaxy A series) are expected to boost the performance of component suppliers. Camera module companies are expected to benefit from price increases and sales growth as optical image stabilization (OIS) components are officially adopted in the Galaxy A series.

The semiconductor supply chain issue is also analyzed to have entered an easing phase. IT (smartphones, TVs, PCs) and automobile production are expected to increase in Q1 next year. Smartphones are anticipated to expand the global OLED TV market with Samsung Electronics’ Galaxy S22 and the launch of QD-OLED TVs in the TV market. Researcher Kangho Park said, “Due to the continued untact effect, PC demand is also considered favorable, and while finished product demand is good, supply disruptions of some components such as semiconductors will gradually be resolved,” adding, “This will increase the operating rates of IT finished product and component companies.”

Meanwhile, Daishin Securities presented Samsung Electro-Mechanics and MCNEX as top preferred stocks reflecting expectations for IT industry improvement. Regarding Samsung Electro-Mechanics, it is expected to record an operating profit of 1.52 trillion KRW this year and 1.57 trillion KRW next year. MLCC is analyzed to continue growth in 5G, laptops, and servers, with supply shortages of semiconductor substrates and an increase in high value-added segments expected to further improve profitability.

Regarding MCNEX, it is estimated to record an operating profit of 28.9 billion KRW this year and 66.2 billion KRW next year, a 129% growth compared to the same period last year. Researcher Park said, “The increase in OIS sales will improve margin rates, and automotive cameras are expected to reach 200 billion KRW in sales next year,” adding, “This differentiation factor compared to other camera module companies will be a basis for valuation upgrades.”