KB Securities said on the 4th that demand for key artificial intelligence (AI) components such as MLCCs and FC-BGAs is rising quickly, which will significantly improve earnings for Samsung Electro-Mechanics. It kept its investment rating at Buy and raised its target price to 1.1 million won from 1.05 million won. The previous trading day's closing price for Samsung Electro-Mechanics was 832,000 won.
Lee Chang-min, an analyst at KB Securities, said, "Multilayer ceramic capacitors (MLCCs) and flip-chip ball grid arrays (FC-BGAs) will post profitability that exceeds market expectations, backed by a surge in AI-driven demand, rising prices, and an improved product mix." Lee added, "In particular, for FC-BGAs, earnings improvement is expected to stand out as supplies to a North American hyperscale graphics processing unit (GPU) maker begin earlier than planned."
In the first quarter of this year, Samsung Electro-Mechanics posted sales of 3.2091 trillion won and operating profit of 280.6 billion won. Sales rose 17% and operating profit 40% from a year earlier. Excluding one-off expenses (retirement benefit provision of 71.4 billion won), results far exceeded the consensus (the average of securities firm forecasts).
KB Securities analyzed that strong results for AI servers and power infrastructure—AI-wide MLCCs and FCBGAs—led the earnings uptrend. It projected that second-quarter results this year will come in at sales of 3.28 trillion won and operating profit of 398.3 billion won, well above the operating profit consensus of 352 billion won.
As for why it raised the target price, the firm noted it adjusted its estimate for the compound annual growth rate (CAGR) of operating profit over the next five years to +49% from +47%, reflecting high profit growth driven by the AI supercycle.
It cited an improved product mix as the key to strong earnings growth. The analyst said, "The share of products with high selling prices and strong profitability, such as those for AI servers, is rising quickly, replacing lower value-added products such as those for legacy IT."
Accordingly, it projected Samsung Electro-Mechanics' companywide operating margin will improve from 7.6% in the second quarter of 2025 to 12.1% in the second quarter of this year, and from 15.1% in the fourth quarter of this year to 18.8% in the second quarter of 2027.