[Click eStock] Samsung Electro-Mechanics, Profit Continues to Rise with 'Record Low PER'

[Asia Economy Reporter Lee Seon-ae] DB Financial Investment announced on the 13th that it maintains a buy rating and a target price of 270,000 KRW for Samsung Electro-Mechanics.

Researcher Kwon Seong-ryul of DB Financial Investment stated, "With continuous double-digit profit growth, MLCC and package substrates, which can be considered true electronic components, are expanding alongside the front-end industries and market conditions," adding, "The 2022 price-to-earnings ratio (PER) is at an all-time low of 11.2 times, so investors should buy 'real' electronic component companies."

Samsung Electro-Mechanics is scheduled to announce its Q4 2022 earnings on the 26th. Operating profit is expected to be 319.9 billion KRW (-30.1% QoQ, +26.6% YoY), falling short of the market consensus of 382 billion KRW.

However, the content is not bad; it is estimated that one-time costs related to achieving record-high performance were reflected, and without these one-time costs, results could have exceeded initial expectations. There was a component inventory adjustment typically occurring in Q4, leading to a decline in sales by business division compared to Q3, but excluding one-time costs, profitability was as good as expected due to product mix improvements.

MLCC sales decreased by about 10% due to reduced orders from Chinese smartphone customers, but camera modules performed better than expected due to early production for the Galaxy S22.

After achieving record-high performance in 2021, operating profit is expected to increase by 15% in 2022 as well. It is anticipated that operating profit will exceed 1.4 trillion KRW in 2021, and the improving performance trend will continue into 2022. The substrate division is expected to see about a 100 billion KRW increase in profit due to improved profitability from the package substrate boom and reduced related losses following the withdrawal from the RF PCB business.

MLCC’s blended ASP continues to rise due to increased proportions of automotive and industrial use, and an operating profit margin of over 20% is expected to be maintained. Researcher Kwon said, "Sales are expected to reach 2 trillion KRW in substrates, 5 trillion KRW in components, and 3 trillion KRW in camera modules, entering an era of 10 trillion KRW in total company sales."

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