[Click eStock] "Samsung Electro-Mechanics: Correction Is a Buying Opportunity... Target Price Raised"

Target Price Raised from 3.1 Million Won to 3.4 Million Won

On January 26, Hana Securities stated that the recent correction in Samsung Electro-Mechanics' stock should be viewed as a buying opportunity, raising its target price from 3.1 million won to 3.4 million won. The investment rating was maintained at 'Buy'.

Kim Minkyeong, a researcher at Hana Securities, said, "We are raising our operating profit estimate for Samsung Electro-Mechanics this year by 6% and increasing the target price to 3.4 million won," adding, "Although there was a temporary stock price correction due to disappointment over the recent multilayer ceramic capacitor (MLCC) price trend, the second half MLCC supply and demand environment should be seen as a buying opportunity."

In the fourth quarter of last year, Samsung Electro-Mechanics recorded sales of 2.9021 trillion won, up 16% year-on-year, and an operating profit of 239.5 billion won, up 108%. Kim noted, "Operating profit exceeded the consensus (the average forecast by securities firms) by about 5%, mainly due to favorable exchange rates and yield improvements across all business divisions." He analyzed, "Although shipments in the components division decreased due to year-end inventory adjustments by IT clients, the blended average selling price (Blended ASP) increased thanks to strong demand for industrial and automotive MLCCs. The utilization rate remained above 90%, and inventory increased slightly from the previous quarter to about 4.5 weeks."

Hana Securities forecasts that this year, Samsung Electro-Mechanics will achieve sales of 12.9375 trillion won, up 14% year-on-year, and operating profit of 1.3154 trillion won, up 44%. Kim said, "The expansion of AI server sales in the components and package solutions divisions is expected to drive overall company growth, and the supply of parts for humanoid robots will serve as a momentum factor." He added, "Despite concerns over negative IT demand growth, the annual average utilization rate for MLCCs is estimated to exceed 90%, thanks to increased adoption resulting from the spread of server rack structures and solid demand for automotive MLCCs."

Flip Chip Ball Grid Array (FCBGA) is also expected to operate at virtually full capacity from the second half of the year, due to increased demand for server CPUs and the acquisition of new AI server clients. Kim explained, "Additional FCBGA capacity expansion to meet server demand is expected to be decided in the first half of the year, with mass production contributions estimated to begin at the end of 2028."

The MLCC supply and demand environment is gradually tightening. Kim said, "Especially considering that the amount of MLCCs used in next-generation AI accelerator-based server racks is surging, the tight supply and demand situation is expected to intensify further when the IT set peak season arrives in the second half." He added, "Furthermore, with Murata's earnings announcement scheduled for February 2, market expectations could be reshaped depending on comments regarding MLCC utilization rates, inventory levels, and supply-demand conditions."