Meritz Securities said on the 4th that the stock drop of Samsung Electro-Mechanics is excessive, adding that there has been no change in the direction of the three core growth pillars: multilayer ceramic capacitors (MLCC), ABF substrates, and silicon capacitors (Si-CAP).
It maintained a "buy (BUY)" rating and raised its target price to 2.1 million won from 1.9 million won. The change reflects an upward revision of the price-earnings ratio (PER) to 65 times from 53.4 times. The previous trading day's closing price of Samsung Electro-Mechanics was 1,813,000 won.
Yang Seung-su of Meritz Securities said, "AI MLCCs consume three to five times more production capacity (Capa) than general-purpose MLCCs due to increased stacking processes, so concerns about a supply-demand imbalance across the industry are spreading even as set demand recovery remains limited," adding, "High-capacity MLCCs for AI servers are expected to enter a severe supply shortage phase from the second half, and LTA-based preemptive competition among major clients is also set to intensify."
He also offered a positive outlook for the Si-CAP business. Yang said, "EMIB-T, a client's in-house 2.5D packaging technology for Si-CAP, is a structure that applies TSV to a silicon bridge within the package substrate to improve inter-chip connectivity and power delivery efficiency," adding, "The adoption scale of Si-CAP, which ensures power stability and controls noise, will continue to increase."
The ABF substrate business is also expected to benefit from improving supply-demand conditions. Yang said, "Major competitors appear to have succeeded in raising prices by about 15% to 20% starting in the second quarter," adding, "Samsung Electro-Mechanics is also likely to join the price increases amid a favorable market environment." He also assessed that an expansion of domestic and overseas production capacity based on advance payment contracts and exclusive contracts with clients is imminent.