KB Securities on the 14th said Samsung Electro-Mechanics has ample room for profit growth as key components for artificial intelligence (AI) are enjoying an unprecedented super-boom. It maintained a "buy" (BUY) rating and raised the target price 27% to 1.4 million won from 1.1 million won. Samsung Electro-Mechanics' previous day's closing price was 1,029,000 won.
KB Securities estimated Samsung Electro-Mechanics' second-quarter sales and operating profit this year at 3.33 trillion won and 407.3 billion won, respectively. It said that represents increases of 91% and 12.2% year over year, and is expected to top the market consensus.
Lee Chang-min, an analyst at KB Securities, said, "The dual growth engines of multilayer ceramic capacitors (MLCC) and flip-chip ball grid array (FCBGA), which are fully benefiting from the AI supercycle, will deliver profitability that exceeds market expectations."
The analyst said MLCC is expected to see the effects of improved product mix centered on high-priced, high-margin products, along with utilization rates close to 100% and price increases for some AI-related customers. For FCBGA as well, with solid demand for existing customers' server CPUs and AI accelerators, and as supply to a North American hyperscale GPU maker begins faster than scheduled, the magnitude of performance improvement is likely to stand out.
The analyst said, "We maintain our top pick view on Samsung Electro-Mechanics in IT components," adding, "Despite an explosive share-price rally with a 304% return compared with the start of the year, there is still ample room for profit growth."