[Click eStock] "Samwha Capacitor, Establishing Growth Base with Expansion of Electric Vehicle Market"

[Asia Economy Reporter Kwon Jaehee] Hi Investment & Securities maintained a 'Buy' rating on Samhwa Capacitor on the 13th but lowered the target price from 87,000 KRW to 54,000 KRW.

Samhwa Capacitor's consolidated sales for this year are expected to reach 273.4 billion KRW, and operating profit is forecasted at 34.5 billion KRW, representing increases of 4.3% and 3.9% respectively compared to the previous year. In the first half, sales were 135.5 billion KRW and operating profit was 19.2 billion KRW, similar to the same period last year. However, due to a slowdown in IT product demand in the peak season of Q3, a decline in multilayer ceramic capacitor (MLCC) sales is expected, making a performance downturn inevitable.

Nevertheless, growth drivers are expected as sales growth from the main client LG Electronics and the expansion of the electric vehicle market increase demand for automotive MLCCs. Samhwa Capacitor has supplied automotive MLCCs mainly for infotainment (navigation, audio, etc.) through LG Electronics, Hyundai Mobis, and LEAR. In particular, as LG Electronics' Vehicle Component Solutions (VS) division is expected to see sales growth year by year, it is anticipated to contribute to Samhwa Capacitor's future sales increase. Above all, as the electric vehicle market expands annually, demand for automotive MLCCs is expected to rise. For Samhwa Capacitor, not only will existing clients increase volume, but expansion to new clients will also make future sales growth more visible.

The major product DCLC (DC-Link Capacitor) is also expected to show visible growth through expansion to new clients. DCLC is used in power conversion electronic system circuits for voltage stabilization, ripple current removal, inverter circuit protection, and converting DC power to AC power. Major clients include Hyundai Mobis, and in January, Samhwa Capacitor was selected as a supplier of DCLC for the electric vehicle core parts of German eco-friendly car parts company Vitesco Technologies. Through this deal, about 40 billion KRW worth of DCLC will be supplied over seven years starting next year. Additionally, with the growth of the electric vehicle market, new clients are expected to expand. Due to this expansion of new clients, DCLC sales are expected to increase from next year, making growth more visible.

Lee Sangheon, a researcher at Hi Investment & Securities, said, "Although performance growth is expected to stagnate this year due to the slowdown in IT product demand, the foundation for growth is expected to be established through the expansion of new clients driven by the growth of the electric vehicle market," adding, "From next year, sales increases in automotive MLCC and DCLC will become visible."