[Click eStock] "Samsung Electro-Mechanics, Earnings Expected to Remain Weak for a While... Target Price Down"

Target Price Lowered from 210,000 Won to 180,000 Won

On the 16th, NH Investment & Securities downgraded the target price of Samsung Electro-Mechanics from KRW 210,000 to KRW 180,000, citing a slowdown in demand for IT devices that is expected to result in continued weak performance for the time being. The investment rating was maintained at 'Buy.'

Lee Kyu-ha, a researcher at NH Investment & Securities, explained, "Considering the impact of the slowdown in IT device demand, we lowered our earnings estimates and adjusted the target price downward. However, we maintain the investment rating due to the potential benefits from artificial intelligence (AI) in the mid to long term and the possibility of demand recovery."

Demand for global IT devices such as smartphones and PCs is weaker than expected. The researcher stated, "Global IT sales may continue to slow until the first half of 2025, so the market for multilayer ceramic capacitors (MLCC) is expected to recover more slowly than initially anticipated. Taking this into account, we lowered Samsung Electro-Mechanics' 2025 MLCC average selling price (ASP) growth forecast from 3% to 1.5% year-on-year and reduced the shipment volume growth forecast from 5% to 2.5%. We also reflected the delayed recovery in the substrate segment, resulting in a 16.4% reduction in Samsung Electro-Mechanics' operating profit forecast for next year compared to the previous estimate."

Weak performance is expected to continue for the time being. The researcher predicted, "Operating profit in the third quarter of this year is expected to meet the lowered expectations, but the fourth quarter and the first half of 2025 will also likely see weak performance due to the slowdown in IT demand."

However, the mid to long-term benefits from AI remain valid. The researcher added, "In the mid to long term, it is positive that the product lineup eligible for new deliveries will expand, supported by AI advancement, including existing MLCCs, silicon capacitors, and glass substrates."