[Click eStock] "Samsung Electro-Mechanics, Spotlight on Package Substrate Boom and Metaverse Tailwinds"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained a buy rating and a target price of 270,000 KRW on Samsung Electro-Mechanics on the 22nd, stating that the company can enjoy a structural boom in package substrates. Regarding the metaverse, it was expected to have a positive impact on the stock price as the company has taken the lead in securing related technologies.

Samsung Electro-Mechanics' expected operating profit for the fourth quarter is forecasted to reach 394.1 billion KRW, a 56% increase compared to the same period last year. Although demand for MLCCs in untact devices such as PCs and TVs is decreasing, strong demand in industrial sectors like networks and servers is expected to drive up the blended average selling price. Ji-san Kim, a researcher at Kiwoom Securities, said, “Package substrates will continue to operate at full capacity, centered on 5G antenna substrates and new flagship smartphone FC-CSPs,” and added, “Camera modules will see early shipments of high-spec products for new flagship models in the fourth quarter.”

Expectations for a long-term boom in package substrates are gaining attention. This stems from the supply shortage of FC-BGA, which is at the technological forefront of package substrates, meaning the company, a leading FC-BGA provider, is bound to benefit significantly. FC-BGA is becoming larger in size due to the trend of processor enlargement and multi-chip integration, leading to significant production capacity constraints. As packaging technology evolves, manufacturing difficulty increases, making it challenging to meet demand.

Large-scale investment and product advancement in FC-BGA are expected to drive an increase in corporate value. The company plans to enter the high-value server FC-BGA market in the second half of next year, not settling for its current No. 1 position in the PC FC-BGA sector. It is known that large-scale investments will be made for this purpose, and with the discontinuation of RF-PCB, the business portfolio is expected to be modernized, focusing on package substrates.

Accordingly, the company is expected to continue its record-breaking performance next year. The forecasted annual operating profit is 1.7179 trillion KRW, expected to grow 13% compared to a year ago. Package substrates are predicted to achieve an operating profit margin of over 20%, driven by strong demand for FC-BGA, FC-CSP, and 5G communication substrates.

MLCC is expected to begin a recovery cycle again from the second quarter of next year. Inventory adjustments are underway in the smartphone sector, but demand is expected to rebound early next year, supported by new model effects from major customers and Chinese customers. For automotive applications, demand potential is expected to be significant once production disruptions at automakers ease, with autonomous driving and electric vehicles likely to drive growth in the MLCC industry.

The company's moves related to the metaverse are also noteworthy. Researcher Kim said, “The company recently invested in Digilens, a US-based display company specializing in XR devices, and plans to expand results centered on camera, 3D modules, and display modules,” adding, “It is presented as the top pick in the electrical and electronics sector.”

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