KB Securities said on the 4th that a steep profit improvement trend is expected for Samsung Electro-Mechanics. It maintained its "Buy" investment rating and raised the target price to 350,000 won from 300,000 won. The previous day's closing price of Samsung Electro-Mechanics was 261,000 won.
KB Securities estimated that Samsung Electro-Mechanics will post revenue of 2.87 trillion won and operating profit of 228.4 billion won in the fourth quarter of this year (October–December). These are increases of 15% and 99%, respectively, from a year earlier, and it is expected to deliver peak-season-level results despite the off-season.
Lee Chang-min, an analyst at KB Securities, said, "With the won-dollar exchange rate continuing its sharp climb recently, and as the share of high value-added components such as artificial intelligence (AI) server and automotive parts increases, the chronic seasonality is expected to be diluted," and added, "Accordingly, the profitability of business units benefiting from AI, such as multilayer ceramic capacitors (MLCC) and packaging substrates, will exceed the first-half level."
The analyst assessed that starting next year, the MLCC and packaging substrate divisions will enjoy the effects of the "supercycle" created by AI.
For MLCC, the product mix improvement effect is appearing quickly, and some items are expected to see price increases as early as the first half of next year, so a resulting leverage effect is anticipated. Packaging substrates are also expected to see utilization improve from around 60% this year to the 80% range next year and the 90% range in 2027.
The analyst said, "High value-added substrates for networks and servers are expected to fill the void left by PC-oriented FC-BGA, where downstream demand and profitability are sluggish," and noted, "A steep profit improvement trend is forecast as a result." He then picked Samsung Electro-Mechanics as the top pick in the IT components sector.