Samsung Electro-Mechanics, a Reasoned Sprint

Expecting Record High Performance Due to Increased MLCC Demand

[Asia Economy Reporter Eunmo Koo] Samsung Electro-Mechanics is continuously hitting new record highs as expectations grow for its best-ever performance next year, driven by increased demand for multilayer ceramic capacitors (MLCC).

According to the Korea Exchange on the 17th, Samsung Electro-Mechanics' stock price closed at 154,000 KRW, up 2.33% (3,500 KRW) from the previous trading day, extending its upward trend for four consecutive trading days. During the session, it rose as high as 156,000 KRW, setting a new 52-week high. The closing price was the highest since September 7, 2018 (156,500 KRW).

Samsung Electro-Mechanics' stock price has risen 15.4% this month alone, fueled by foreign investors' capital inflow alongside the recent KOSPI rally. This outperforms the KOSPI return of 12.2% during the same period. Foreign investors have net purchased 120.1 billion KRW worth of Samsung Electro-Mechanics shares this month, while institutional investors also net bought 37.3 billion KRW.

The MLCC business has entered a recovery cycle based on demand from 5G smartphones and automotive electronics, with forecasts suggesting record-high performance next year, which has attracted investor interest. Since the second half of the year, the smartphone market has improved and automotive demand has recovered, leading to a boom in MLCCs focused on small size, high capacity, and leading companies. The third-quarter operating profit, which increased nearly 70% year-on-year to 302.5 billion KRW, confirmed the recent boom.

This trend is expected to continue into next year. Kim Rok-ho, a researcher at Hana Financial Investment, stated, "With the increased proportion of 5G smartphones, the number of MLCCs mounted per device is expected to grow, resulting in external growth exceeding the increase in smartphone shipments. Additionally, automotive demand, which was sluggish this year, is expected to recover. The expansion of automotive electronics and electric vehicle shipments will also significantly increase MLCC mounting."

Annual operating profit next year is also expected to recover to the trillion-KRW level for the first time in three years since 2018. According to financial information provider FnGuide, Samsung Electro-Mechanics' operating profit next year is estimated to grow 25% from this year to 1.0307 trillion KRW. Sales during the same period are expected to exceed 9.4144 trillion KRW, growing more than 10% year-on-year.

Although the semiconductor package substrate business accounts for a smaller portion compared to MLCCs, the supply shortage in this area is also considered a positive factor for Samsung Electro-Mechanics. Recently, a fire at the factory of Unimicron, a Taiwanese company ranked among the world's top 10 printed circuit board (PCB) manufacturers and mainly producing flip-chip chip-scale packages (FC-CSP) for application processors (AP), caused supply disruptions. This incident could positively impact Samsung Electro-Mechanics, which produces the largest volume of AP FC-CSPs.

Kwon Sung-ryul, a researcher at DB Financial Investment, said, "Currently, Samsung Electro-Mechanics' semiconductor package substrate production is running at full capacity, making it difficult to increase volume. However, the supply shortage is causing price increases, and from early next year, the positive effects of price hikes are expected to appear for Samsung Electro-Mechanics and major semiconductor package substrate companies."

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