[Click e-Stock] "Samsung Electro-Mechanics, Stock Price Rises with MLCC Market Recovery... Target Price Up 6.5%"

Yuanta Securities Report

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating on Samsung Electro-Mechanics on the 23rd and raised the target price by 6.5% to 245,000 KRW. This is based on the judgment that once concerns over the multilayer ceramic capacitor (MLCC) market subside, a reevaluation of the substrate business division could take place.

According to Yuanta Securities' estimated business value by segment for Samsung Electro-Mechanics, the component division is valued at 11.6 trillion KRW, the substrate division at 4.5 trillion KRW, the module division at 1.1 trillion KRW, and non-operating assets at 400 billion KRW. The sum of the market capitalization based on these estimates is approximately 18 trillion KRW, whereas the company's current market capitalization is only 12 trillion KRW. Go Eui-young, a researcher at Hi Investment & Securities, explained, “The market capitalization can be explained by the business value of only the component and module divisions, meaning the company has yet to receive proper recognition for the value of the substrate business.”

Researcher Go analyzed that the reason the substrate business value is not recognized is largely due to concerns over the MLCC market. Until the first half of the year, major Chinese smartphone manufacturers' set production plans were conservative, and the combination of AP supply issues and sluggish domestic demand increased concerns about the market. The resurgence of COVID-19 in China was also a variable that made it difficult to gauge the extent of downward adjustments.

However, considering plans to increase set production from the second half of the year when the peak of the COVID-19 spread is confirmed, the market is expected to gradually recover. Researcher Go Eui-young stated, “MLCC demand is also expected to gradually recover starting from the end of the second quarter,” adding, “Murata, the industry leader, also expects Chinese smartphone manufacturers to launch new products before this summer, and MLCC demand is anticipated to improve accordingly.”

If the MLCC market does not deteriorate further, a reevaluation of the semiconductor substrate business is also expected to become easier. The withdrawal from marginal businesses such as FPCB and the tight package substrate market conditions are also expected to positively influence the evaluation. Researcher Go said, “During the same period, the operating profit margin (OPM) of the package solution division is expected to sharply improve from 11% to 24%, approaching the level of the global number one company,” and added, “If the profit structure changes, the stock price trend should also change.”

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