KB Securities said on the 27th that Samsung Electro-Mechanics is expected to grow in tandem in multilayer ceramic capacitors (MLCC) and packaging substrates. It kept its "Buy" rating and raised the target price to 2.2 million won from 1.6 million won. The previous trading day's closing price for Samsung Electro-Mechanics was 1,572,000 won.
Lee Chang-min, an analyst at KB Securities, said, "As the results of memory companies show, the components industry for artificial intelligence (AI) is enjoying an unprecedented super-boom," and noted, "Samsung Electro-Mechanics is a top-tier company in both MLCC and packaging substrates, which are core AI components, and explosive earnings growth is expected on the back of high growth in both markets and an improved product mix."
On the reason for raising the target price, Lee explained, "We revised the five-year compound annual growth rate (CAGR) of operating profit up to 68% from 61%, considering a full-fledged entry into an MLCC upcycle and expanded growth potential for packaging substrates."
KB Securities analyzed that MLCC has recently entered a price hike phase. Given that the operating margin has exceeded 40% in the past, it projected a strong trend of profitability improvement. Growth is also expected for silicon capacitors, for which Samsung Electro-Mechanics recently released an order of 150 billion won.
For packaging substrates, with production lines expanded in Vietnam and Korea, production capacity (CAPA) for flip-chip ball grid array (FCBGA) is projected to double from the previous level, and a rising price trend has also been detected, so earnings growth is expected to beat market expectations.
Lee said, "The earnings contribution from glass substrates, which will begin mass production in the second half of 2027, is also expected to expand gradually," adding, "Ultimately, embedded substrates that integrate MLCCs and silicon capacitors inside the substrate are highly likely to become Samsung Electro-Mechanics' differentiated core AI components."
Meanwhile, KB Securities forecast Samsung Electro-Mechanics' second-quarter results this year at 3.33 trillion won in revenue and 407.3 billion won in operating profit. Revenue would be up 19% and operating profit 91% from a year earlier, seen topping the consensus (market average forecast). The operating margin was estimated at 12.2%.
Lee said, "MLCC is expected to post strong results thanks to price increases and a product mix centered on high-profit items," and noted, "For FCBGA, as supplies to a North American hyperscale graphics processing unit (GPU) manufacturer began earlier than planned, the magnitude of earnings improvement is expected to stand out."