[Click eStock] "Samsung Electro-Mechanics Depends on Chinese Smartphone Demand... Q2 Recovery"

[Asia Economy Reporter Kwon Jae-hee] Kiwoom Securities maintained its buy rating on Samsung Electro-Mechanics on the 17th but lowered the target price to 240,000 KRW.

The stock price adjustment is attributed to concerns over delayed recovery of multilayer ceramic capacitors (MLCC) due to weak smartphone demand in China and controversies surrounding the performance of new flagship models.

Samsung Electro-Mechanics' operating profit for the first quarter is expected to increase by 16% year-on-year to 412.1 billion KRW, meeting the market consensus of 404.7 billion KRW.

By business segment, MLCC shipments in non-IT sectors such as automotive electronics are favorable, leading to a slight increase in first-quarter sales. The key to industry recovery lies in Chinese smartphone demand, which has been delayed due to prolonged weakness caused by the adherence to the zero-COVID policy and shipment disruptions from the Ukraine war. It is expected to enter a recovery cycle from the end of the second quarter ahead of new model launches by Chinese OEMs in the third quarter.

Package substrates are operating at full capacity, with strong demand centered on new substrates such as ARM and Aip.

The optical communication solutions segment benefits from repeated effects of flagship launches in the first quarter and an increasing sales proportion of the Galaxy S22 Ultra model equipped with high-performance camera modules.

Accordingly, operating profit for this year is forecasted to increase by 15% to 1.7078 trillion KRW.

Researcher Kim Ji-san of Kiwoom Securities analyzed, "In the second half, MLCC supply and demand conditions will improve, supported by the production capacity expansion effect of package substrates. The sales proportion of automotive MLCC is expected to reach double digits this year, and automotive camera sales are projected to grow 30% to 250 billion KRW."

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