Yuanta Securities Korea on the 12th said operating profit at Samsung Electro-Mechanics will top 2 trillion won next year on price hikes and higher volumes for multilayer ceramic capacitors (MLCC). It sharply raised its target price to 540,000 won from 370,000 won and kept a buy rating. The previous trading day's closing price for Samsung Electro-Mechanics was 406,000 won.
Yuanta Securities Korea said the MLCC industry is growing on the back of solid server demand and constrained supply. Ko Sun-young, an analyst at Yuanta Securities Korea, said, "A structural demand shift is underway from B2C (business-to-consumer transaction) demand to B2B (business-to-business transaction) servers, but suppliers' responses remain conservative."
Ko said, "We believe the market has entered an environment where the company can consider aggressive options in pricing strategy and capacity responses depending on MLCC supply-demand conditions," adding, "Both core divisions—MLCC and FC-BGA (flip-chip ball grid array)—are expected to benefit, making this a rare phase where upcycles are unfolding simultaneously."
Yuanta Securities Korea said Samsung Electro-Mechanics' MLCC business is seeing price hike momentum take hold, while FC-BGA profitability is set to improve sharply on increased allocations for artificial intelligence (AI) servers and higher utilization. It estimated operating profit will exceed 2 trillion won next year, more than doubling within two years.
Ko said, "The company holds an edge in profit growth over competitors focused on a single division," noting, "It is at the very start of the strongest profit growth cycle, and if price hikes materialize and the increase outpaces expectations, there is room to raise the target price further."