[Click eStock] "Samhwa Capacitor, Cost Increase and Decrease in Automobile Shipments... Target Price Down 9%"

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on Samhwa Capacitor on the 23rd and lowered the target price by 9% to 82,000 KRW. This decision was based on the judgment that short-term profitability damage is inevitable due to the continued rise in raw material prices caused by Russia's invasion of Ukraine.

The company's first-quarter performance this year is expected to show sales of 64 billion KRW and operating profit of 8.3 billion KRW, representing a 1% increase and an 8% decline respectively compared to the same period last year. This is due to the expanded demand uncertainty for passive components related to electric vehicles (MLCC, DCLC, etc.) caused by the war between Russia and Ukraine. Additionally, the demand for IT components, which benefited from the untact trend, is expected to slow down due to increased outdoor activities as COVID-19 concerns ease.

Researcher Changmin Lee explained, "We are revising down Samhwa Capacitor's expected ROE for this year and next year from 15.3% and 15.3% to 14.2% and 14.8%, respectively," adding, "The upside potential of the target price compared to the current stock price is about 44%."

In the short term, profitability may decline due to rising raw material prices caused by the prolonged war between Russia and Ukraine, along with a decrease in overall automobile shipments. However, these adverse conditions are expected to improve in the second half of the year. Samhwa Capacitor's performance this year is predicted to grow by 5% in sales to 276.7 billion KRW and by 16% in operating profit to 38.6 billion KRW compared to the previous year.

KB Securities researcher Changmin Lee stated, "In the mid to long term, benefits are expected from the spread of electric vehicles and autonomous vehicles," explaining, "As automobiles become more electrified, the amount of MLCC installed increases." Currently, the company is recognized for its technological capabilities to the extent that it supplies Tesla with the highest value-added passive components for electric vehicles, specifically MLCCs for the drive system.