KB Securities said on the 17th that Samsung Electro-Mechanics is expected to show strong profit growth through next year. It kept a "Buy" rating and a target price of 300,000 won. The previous day's closing price of Samsung Electro-Mechanics was 213,000 won.
Researcher Lee Chang-min at KB Securities said, "Since last year, as investment related to artificial intelligence (AI) has surged, led by North American big tech companies, sales of high value-added components for servers and networks have skyrocketed," and noted, "We judge that the MLCC and package substrate industries have entered the early stage of a boom."
He added, "Along with the overall increase in sales volume, the effect of improving the product mix centered on high value-added products is also expected to appear strongly." He presented Samsung Electro-Mechanics as the top pick within the IT components sector.
In particular, while MLCC is maintaining an operating rate close to 100%, production continues to focus on high-spec products such as AI servers and automotive electronics, and the product mix structure is expected to become similar to that of Murata, the industry leader and competitor (Component Division operating margin 28.8%). Accordingly, the profitability gap will naturally narrow, the researcher assessed.
The researcher estimated that Samsung Electro-Mechanics will post revenue of 2.81 trillion won and operating profit of 217.8 billion won in the fourth quarter (Oct.–Dec.) of this year. These represent increases of 13% and 89%, respectively, from a year earlier, with an operating margin of about 7.8%.
The researcher said, "As the share of AI servers and automotive components increases, the seasonality of IT components will be diluted, so the decline in sales volume due to inventory adjustments by downstream customers will be limited," and added, "Even in the off-season, results at a peak-season level will be recorded, and strong profit growth will be achieved for the second consecutive year."