[Click eStock] "Samsung Electro-Mechanics, H2 Performance Improvement Expected... Target Price Raised to 145,000"

[Asia Economy Reporter Oh Ju-yeon] KB Securities expects Samsung Electro-Mechanics' Q2 earnings this year to meet market consensus. Although the first half of the year was inevitably hit by weak demand due to the novel coronavirus disease (COVID-19), the second half is expected to see improved performance, accounting for 60% of the annual operating profit.

According to KB Securities, Samsung Electro-Mechanics' Q2 sales are estimated at 1.8 trillion KRW, down 8% year-on-year, and operating profit is expected to be 95.4 billion KRW, down 52%, in line with the market consensus operating profit of 97.7 billion KRW.

Q3 operating profit is estimated at 210.2 billion KRW, up 17% year-on-year, due to the recovery of the operating rate at the Philippine plant, which was shut down due to COVID-19, the rise in MLCC prices, and increased sales of semiconductor substrates, indicating performance improvement with the arrival of the peak season.

This year, Samsung Electro-Mechanics is estimated to record sales of 8.3 trillion KRW and operating profit of 642.4 billion KRW, affected by weak smartphone demand in the first half due to COVID-19. However, the operating profit in the second half is expected to account for 60% of this, or 382.5 billion KRW, a 17% increase compared to the same period last year.

Researcher Kim Dong-won analyzed, "Currently, MLCC inventory (4 weeks) is below the appropriate inventory level (6 weeks) despite the increase in operating rates, indicating tight supply. ASP is expected to rise due to increased demand for 5G and IT MLCCs, and from the second half, semiconductor substrate sales are expected to grow over 20% year-on-year with the opening of the 5G market."

Researcher Kim also stated, "Although Samsung Electro-Mechanics' earnings are inevitably expected to decline this year compared to last year, operating profit next year is estimated to increase by 36% year-on-year to 872.7 billion KRW."

He maintained a 'Buy' investment opinion, noting that MLCC supply and demand will improve in the second half of this year, and revised the controlling shareholder net profit for 2020 and 2021 upward by 9% and 19%, respectively, raising the average return on equity (ROE) from 9.5% to 10.6%. The target stock price was also raised by 11.5% to 145,000 KRW.

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