[Click eStock] "Samsung Electro-Mechanics, Increasing Earnings Sustainability... Target Price Raised"

On January 5, iM Securities announced that it expects Samsung Electro-Mechanics to demonstrate improved earnings sustainability compared to previous cycles and raised its target price to 3.5 million won. The firm maintained its 'Buy' investment rating.

iM Securities projected Samsung Electro-Mechanics’ operating profit for this year at 1.3 trillion won, a 44% increase from last year. Ko Euiyoung, a researcher at iM Securities, stated, "We expect the MLCC market for artificial intelligence (AI) servers to grow from the 1 trillion won range last year to between 3.5 trillion and 4 trillion won by 2030." He emphasized, "This represents an average annual growth rate of around 30%, which far exceeds the long-term growth rate of the MLCC industry at 7-8%." He added that Samsung Electro-Mechanics and Murata currently hold an oligopolistic market share.

He also predicted that the improvement in the MLCC product mix would occur faster than previously expected. He explained, "As leading companies such as Samsung Electro-Mechanics and Murata are operating at near 100% utilization rates, especially for high-value-added MLCCs, we believe this is a phase where they can optimize customer selection and product mix." He stressed, "This year, the direction will become clearer, with a reduction in low-margin IT MLCCs and an expansion of high-value-added AI and automotive MLCCs."

He further highlighted that the potential of the physical AI sector has not yet been reflected in the stock price. He said, "The strategic value of Samsung Electro-Mechanics’ business portfolio remains underestimated in the market amid the spread of physical AI in areas such as autonomous driving and robotics." He continued, "Samsung Electro-Mechanics supplies key components such as passive devices, cameras, and substrates as a main vendor for Company T's autonomous driving solutions, and this collaboration is expected to naturally expand into humanoid robots."

For the fourth quarter of last year, he estimated sales at 2.83 trillion won and operating profit at 234 billion won. He explained, "With the exchange rate being favorable and demand from the industrial and automotive sectors, MLCC utilization rates are expected to exceed the previously planned 90%." He added, "This represents an unusually high utilization rate, especially considering it is a seasonally slow period."