Shinhan Investment Securities on the 26th projected that Samsung Electro-Mechanics will rise as a core value chain in a "supply shortage" market for multilayer ceramic capacitors (MLCC) and substrates. It kept a buy rating and raised its target price to 2 million won from 1 million won. The previous trading day's closing price of Samsung Electro-Mechanics was 1.34 million won.
Oh Gang-ho, a researcher at Shinhan Investment Securities, said, "The point that differentiates this cycle is the expected expansion in sales of high value-added products and higher supply prices," adding, "A leap to a leading global components maker and structural growth are expected."
On the 20th, Samsung Electro-Mechanics disclosed that it had signed a silicon capacitor supply contract with a large global corporation. As instantaneous current usage for artificial intelligence (AI) graphics processing units (GPUs) and application-specific integrated circuits (ASICs) increases and stability for speed and power efficiency comes to the fore, silicon capacitors stabilize power close to the chip.
In particular, the key is rising demand for AI-related high value-added products rather than viewing them as substitutes for existing MLCCs. On the demand (Q) side, demand for AI high value-added products is being confirmed, and considering the size of the contract, component sales in 2027 are expected to be revised up by 11% from the previous outlook. For price (P), mix improvement effects are expected, and given product characteristics, production is estimated to be separate from the current component business capacity (CAPA).
Shinhan Investment Securities raised Samsung Electro-Mechanics' target price-to-earnings ratio by 20% from the previous level to 49.6 times and changed the earnings-per-share (EPS) application year from 2027 to 2028. In particular, it lifted the 2028 EPS forecast by 33% from the prior estimate, reflecting expectations for future earnings improvement.
Regarding the reason for the upward revisions, Oh said, "Profitability for components and substrates is expected to improve, and assuming the component utilization rate rises above 90%, prices are expected to increase on mix effects." He added, "Growth expectations are expanding across the business, with sales expected to rise on product portfolio expansion."
As the valuation basis, past valuations of global companies were applied. In the case of Japan's Murata, an MLCC maker, the multiple was revised up from 18 times in 2024 to 48 times in 2026, and for substrates, the average valuation of global companies (Ibiden, Unimicron) over the past two years recorded 64 times.
Oh added, "This is judged to be a phase that simultaneously proves structural growth and levels up alongside the global top tier."