[Click eStock] "Samsung Electro-Mechanics, Continued Earnings Improvement... Target Price Up 5%"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating on Samsung Electro-Mechanics on the 2nd and raised the target price by 8% from the previous level to 260,000 KRW. This is based on the judgment that there is additional upside potential considering the annual operating profit estimate of 1.4 trillion KRW.

Samsung Electro-Mechanics' third-quarter sales are expected to increase by 1.1% quarter-on-quarter to 2.502 trillion KRW, and operating profit is forecast to rise by 21.5% during the same period to 412.2 billion KRW. This is because sales from business units excluding the module division are expected to increase compared to the second quarter.

The substrate division is expected to record sales of 553.9 billion KRW, up 75% from the previous quarter, as sales of Radio Frequency Printed Circuit Boards (RF-PCB) enter the peak season. Sales of Ball Grid Array (BGA) and Flip Chip Ball Grid Array (FC-BGA) are projected to increase by 10.6% and 3%, respectively, which is estimated to be due to increased sales of AIP and SiP and the effect of price hikes.

The component division is predicted to achieve sales of 1.2583 trillion KRW, a 5% increase from the previous quarter. The volume and product mix of Multilayer Ceramic Capacitors (MLCC) are expected to improve compared to the second quarter.

However, the module division is expected to record 689.9 billion KRW, down 15% from the second quarter due to a decrease in overseas customer orders. Researcher Unho Kim of IBK Investment & Securities explained, “While new product launches by domestic customers will have a positive impact, the effect of decreased overseas orders was greater,” adding, “The improvement in the average selling price (ASP) of new products from domestic customers is not significant, so the improvement will be smaller compared to previous years.”

Next year, Samsung Electro-Mechanics is expected to deliver improved performance in all three operating divisions?substrate, component, and module?compared to this year. The substrate division is experiencing price increases due to a shortage in the supply of substrate boards, and the MLCC in the component division is also showing limited price declines due to tight supply and demand, with performance improving thanks to product mix enhancements. The underperforming module division is expected to secure a growth foothold through improvements in customer product specifications.

Researcher Unho Kim said, “Samsung Electro-Mechanics is expected to record an annual operating profit of 1.4 trillion KRW this year, and considering this, we believe there is additional upside potential,” adding, “As performance improvement is expected to continue through the third quarter, it is advisable to maintain a buy stance until the slowdown in the MLCC market becomes apparent.”

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