[Click eStock] "Samsung Electro-Mechanics, Strong Q3 Performance Expected Due to MLCC Effect"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating on Samsung Electro-Mechanics on the 10th and raised the target price by 8% from the previous to 185,000 KRW. This is based on the judgment that the favorable market conditions could continue through the fourth quarter.

Samsung Electro-Mechanics' sales for the third quarter of this year are estimated at 2.1482 trillion KRW, an 18.5% increase compared to the second quarter. Due to improvements in the mobile market, sales across all business divisions are expected to increase compared to the second quarter. Operating profit is forecasted to reach 271.7 billion KRW, nearly doubling from the second quarter.

The substrate business division's operating profit is expected to be 37.7 billion KRW, with the normalization of sales in Radio Frequency Printed Circuit Boards (RF-PCB) leading to a turnaround to profitability in smartphone substrate (HDI) operating profit. The component business division's operating profit is projected to more than double compared to the second quarter due to improved product mix effects. The module business division is expected to see improved profitability due to increased sales and a higher proportion of premium products.

The heightened expectations for performance improvement are thanks to Multilayer Ceramic Capacitors (MLCC). Kim Unho, a researcher at IBK Investment & Securities, explained, "It is judged that the performance is not moving together with DRAM," adding, "Servers have a small share in the MLCC market, and differences in customer inventory levels mean MLCC will show a different pattern from DRAM."

In the PC sector, DRAM and MLCC are expected to show differences. DRAM has a small share in the PC market, and price improvements have little impact on the performance of major DRAM companies. However, MLCC is an item directly influenced. Differences are also expected in the mobile sector. The influence of mobile demand improvement on the MLCC market is greater than on DRAM. Additionally, Samsung Electro-Mechanics' customer base has a small proportion of Huawei and a high proportion of Samsung Electronics, which is advantageous compared to the general market situation.

Regarding Flexible Printed Circuit Boards (FPCB), performance improvement in the fourth quarter is expected due to delayed schedules of overseas clients. The camera module will benefit from seasonal effects in the third quarter, but a different growth strategy from latecomers is deemed necessary.

Researcher Kim Unho said, "The favorable market conditions in the MLCC sector are expected to continue through the fourth quarter," and added, "Although operating profit in the fourth quarter is seasonally in the off-season, the decline compared to the third quarter will not be significant."

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