DB Securities said on the 29th that multilayer ceramic capacitors (MLCCs) for artificial intelligence (AI) servers are playing a key role in boosting operating profit at Samsung Electro-Mechanics. It raised its target price to 240,000 won from 190,000 won and maintained a "buy" rating. The previous trading day's closing price for Samsung Electro-Mechanics was 191,700 won.
DB Securities estimated Samsung Electro-Mechanics' third-quarter sales and operating profit this year at 2.8344 trillion won and 249.3 billion won. That would be up 8.8% and 7.6%, respectively, from a year earlier. Next year's operating profit is expected to top 1 trillion won for the first time since 2022.
The core of the profit increase comes from server MLCCs in the Components Division. Cho Hyeon-ji, an analyst at DB Securities, said, "Even without assuming price hikes for individual MLCC products, rising average selling prices from a better product mix and higher utilization rates are leading to operating leverage, translating into performance growth for the Components Division, which will drive both qualitative and quantitative improvement in companywide results."
MLCC content in AI servers is estimated to be 100 times that of general servers, and production of AI server MLCCs can reportedly use some IT MLCC equipment. Cho said, "Samsung Electro-Mechanics will achieve an upgrade in its product portfolio centered on high-value product groups such as industrial and automotive by reducing the share of general-purpose IT MLCCs over the mid to long term based on production line efficiency, while increasing the share of industrial MLCCs."
Within the Components Division, the share of server-grade MLCCs was in the low 10% range in the second quarter of this year and is expected to approach the 20% range by the end of next year.
Cho said, "Among global competitors, the companies that effectively have the technological capability to stably produce high-end AI server-grade MLCCs are limited to Samsung Electro-Mechanics and Japan's Murata," adding, "AI-driven benefits will continue over the mid to long term." She added, "We maintain our top-pick view among large-cap electrical and electronics names."