Samsung Electro-Mechanics Hits Consecutive Record Highs... 'A Fresh Start'

Expectations for Improved Performance from Restructuring Loss-Making Businesses... Target Prices Raised Consecutively

[Asia Economy Reporter Song Hwajeong] Samsung Electro-Mechanics has been continuously hitting new record highs this year, maintaining a strong upward trend since the beginning of the year.

As of 9:35 AM on the 3rd, Samsung Electro-Mechanics recorded 128,500 KRW, up 1.58% (2,000 KRW) from the previous day. During the session, it rose to 129,000 KRW, setting a new 52-week high again in just one day. The preferred stock, Samsung Electro-Mechanics Preferred (Samsung Jeongi-u), also continued its two-day streak of record highs. Samsung Electro-Mechanics Preferred rose to 51,400 KRW during the session, also marking a new 52-week high in just one day.

This strong performance of Samsung Electro-Mechanics is interpreted as reflecting expectations for improved earnings following the restructuring of loss-making businesses last year. In April, Samsung Electro-Mechanics sold its PLP business to Samsung Electronics, and last month, it decided to liquidate its Kunshan subsidiary in China, the main production base for high-density interconnect (HDI) circuit boards, effectively exiting the HDI business as well.

Kwon Seongryul, a researcher at DB Financial Investment, said, "In the first half of last year, Samsung Electro-Mechanics sold the PLP business, which did not fit its business profile, and at the end of last year, decided to restructure the HDI business, which had been incurring large losses." He added, "The sale of the PLP business eliminated related losses and reduced production capacity burdens, while cash inflows from the sale provided room for reinvestment in core businesses." Kwon further noted, "With the restructuring of the loss-making business that recorded a cumulative deficit of 500 billion KRW, an annual profit improvement effect of over 60 billion KRW is expected starting this year."

Accordingly, noticeable earnings improvement is expected from this year. Daishin Securities forecast Samsung Electro-Mechanics' operating profit for this year to increase by 15.8% year-on-year to 810.8 billion KRW, and to rise by 6.6% to 864.7 billion KRW next year. Park Kangho, a researcher at Daishin Securities, explained, "With the discontinuation of the PLP and HDI businesses removing loss-making segments and reflecting the rise in average selling prices (ASP) of key components this year, overall operating profit has potential for further upward revision." He added, "This year, packaging will see increased customer orders and expanded technology upgrades, and camera modules will have higher average prices than last year due to the addition of 5x zoom functionality and a higher adoption rate of high-resolution sensors." Additionally, multilayer ceramic capacitors (MLCC) are expected to see improved profitability in the second quarter of this year due to price increases and product mix effects.

With expectations for Samsung Electro-Mechanics' earnings improvement, securities firms have also raised their investment opinions and target prices one after another. Daishin Securities raised Samsung Electro-Mechanics' target price from 135,000 KRW to 155,000 KRW, and DB Financial Investment upgraded its investment opinion from 'Hold' to 'Buy' and raised the target price from 120,000 KRW to 150,000 KRW.

This content was produced with the assistance of AI translation services.