[Click eStock] "Samhwa Condenser, Strong Demand for MLCC in Communication Equipment... Positive Performance Expected Next Year"

Expectations for a Ripple Effect in Easing the Semiconductor Supply Shortage for Vehicles

[Asia Economy Reporter Minwoo Lee] Samhwa Capacitor is expected to experience some sluggishness in its automotive multilayer ceramic capacitor (MLCC) business due to the shortage of automotive semiconductors, but its industrial MLCC business, including semiconductors and communication equipment, is expected to maintain a steady trend. Next year, overall favorable conditions are anticipated as the supply of automotive semiconductors improves.

On the 24th, KB Securities maintained a 'Buy' rating and a target price of 78,000 KRW for Samhwa Capacitor based on this background. The closing price the previous day was 60,200 KRW.

First, it is expected to record consolidated sales of 67 billion KRW and operating profit of 7.3 billion KRW in the fourth quarter of this year. These figures represent increases of 11% and 103%, respectively, compared to the same period last year. This is generally in line with market consensus estimates of 67.9 billion KRW in sales and 7.5 billion KRW in operating profit. KB Securities analyst Changmin Lee explained, "Although a sales decline compared to the previous quarter is inevitable due to customer inventory adjustments as we enter the seasonal off-season, the intensity of inventory adjustments is expected to be weaker than usual," adding, "This is because major competitors experienced production disruptions in the 2nd and 3rd quarters due to COVID-19, so their inventory levels are estimated to be not higher than usual."

The automotive MLCC segment has continued to show weaker-than-expected performance due to decreased demand caused by the automotive semiconductor shortage. On the other hand, demand for industrial MLCCs such as those for semiconductors and communication equipment is expected to remain robust in the fourth quarter. The analyst noted, "In the case of communication equipment MLCCs, which have not stood out compared to competitors, monthly sales have increased to about five times the level of the previous year, indicating a positive sales trend going forward."

Next year's performance is also expected to be solid. Consolidated sales are projected at 304.1 billion KRW and operating profit at 47.3 billion KRW, representing increases of 13% and 18%, respectively, compared to this year's forecast. The operating profit margin is expected to reach 15.6%, achieving the highest profitability since the boom in 2018. With semiconductor and communication equipment MLCCs performing well and the automotive semiconductor supply situation improving from the second quarter onward, performance improvement in automotive MLCCs is also anticipated.

In particular, a ripple effect from the high growth of LG Electronics' Vehicle Components (VS) division is expected. The analyst said, "More than 60% of Samhwa Capacitor's automotive MLCC sales occur through LG Electronics' VS division," adding, "LG Electronics' VS division sales are projected to increase by 29% year-on-year in the second half of next year, and continued high growth is expected, which bodes well for Samhwa Capacitor's concurrent growth."

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