[Click eStock] Samsung Electro-Mechanics, Excessive MLCC Concerns... Discrepancy Between Stock Price and Performance

[Asia Economy Reporter Lee Seon-ae] Shinhan Financial Investment stated on the 26th that it maintains a Buy rating and a target price of 240,000 KRW for Samsung Electro-Mechanics, focusing on the company's solid future earnings trend.

Samsung Electro-Mechanics' operating profit for the third quarter is expected to be 432.4 billion KRW (+41% YoY), surpassing the consensus estimate of 389.7 billion KRW. Park Hyung-woo, Senior Researcher at Shinhan Financial Investment, explained, "The MLCC boom continues, and as we enter the second half (peak season), demand for high-end product lines remains steady. In the third quarter, demand in the component industry is recovering due to increased smartphone production by strategic customers and flagship launches by North American clients. Contrary to early-year concerns, a favorable USD-KRW exchange rate environment persists."

He analyzed that concerns about MLCC are excessive. Park said, "Some interpret Yageo's resistor price decline news as a sign of a passive component down cycle, but the price trends for resistors and inductors have been differentiated between Taiwanese and domestic companies since the end of last year and the first half of this year." He added, "Murata (MLCC market share 40%)’s Fukui plant has suspended operations due to COVID-19 (since August 25), so supply and demand are expected to remain tight due to production disruptions in Japan," and "this trend can largely dispel concerns about the possibility of passive component price declines."

The target price of 240,000 KRW reflects the 2021 book value per share (BPS) and applies the average price-to-book ratio (PBR) from the past boom period (2010).

Senior Researcher Park emphasized, "The rising MLCC market share (22% in 2019 → 23% in 2020 → 25% in the first half of 2021) is evidence of competitive advantage. Demand for mobile components, which account for over 60% of sales, is recovering. The stock price has underperformed compared to other sectors and even within the IT sector since the beginning of the year, so I believe there is a gap between the stock price and earnings trends."

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