[Click eStock] Smartphone, PC, and Network Demand Up... "Samsung Electro-Mechanics to Exceed 1Q Earnings Expectations"

1Q Sales 2.4 Trillion KRW, Operating Profit 326.1 Billion KRW Expected
Performance Improvement Driven by Demand Increase Despite Stable MLCC Prices
Possibility of Some MLCC Price Increase from 2Q

[Asia Economy Reporter Minwoo Lee] Samsung Electro-Mechanics is expected to post better-than-expected results for the first quarter of this year. Demand is improving in all business units except for the circuit board (RFPCB) segment, and the rise in the KRW-USD exchange rate is also expected to be beneficial.

On the 15th, Meritz Securities forecast that Samsung Electro-Mechanics will record sales of 2.3878 trillion KRW and an operating profit of 326.1 billion KRW in the first quarter of this year. Compared to the same period last year, sales are expected to increase by 7.3% and operating profit by 98.2%. These figures also exceed market consensus by 1.6% and 9.7%, respectively. Researcher Minwoo Joo of Meritz Securities explained, "Due to demand improvements centered on smartphones, PCs, and networks, performance improvements are expected in all business units except for the circuit board (RFPCB) segment. Additionally, the rise in the KRW-USD exchange rate had a positive impact."

In the first quarter, the average selling price of multilayer ceramic capacitors (MLCC) is estimated to have increased by 2.0% compared to the previous quarter, and shipments increased by 6.0%. The absolute price of MLCC has not yet risen, and this is attributed to the effects of exchange rates and product mix. Inventory remains at around 30 days (optimal inventory is 45 days), and the operating rate is still above 90%. Researcher Joo analyzed, "The shipment volume of Samsung Electronics smartphones (Galaxy), a major demand source, recovered to 74 million units in the first quarter, a 26% increase compared to the same period last year, leading to performance improvements in MLCC, cameras, and circuit boards."

MLCC prices are expected to gradually rise starting from the second quarter. MLCC supply and demand have been tight since the third quarter of last year due to the combined recovery of IT demand and automotive parts demand. Despite most MLCC manufacturers operating at full capacity, inventory levels remain below optimal. Taiwanese company Yageo plans to increase MLCC prices by 10-20% starting in the second quarter.

Samsung Electro-Mechanics is also likely to raise prices of mid-to-low-end MLCCs sold to distributors (estimated to account for 20% of sales) by 10-20% during the second quarter. Prices for MLCCs sold to direct customers (estimated to account for 80% of sales) are expected to be decided cautiously based on future supply and demand conditions. Direct customers have stronger negotiating power compared to distributors, and if the market normalizes (or enters a downcycle), prices could fall more sharply, so in the long term, the benefits may not be significant.

Meritz Securities maintained a 'Buy' rating and a target price of 280,000 KRW for Samsung Electro-Mechanics based on these factors. The closing price on the previous trading day was 192,500 KRW.

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