[Click eStock] "Samsung Electro-Mechanics, Valuation at All-Time Low... Focus on China Demand in Second Half"

[Asia Economy Reporter Kwon Jaehee] Kiwoom Securities maintained a 'Buy' rating on Samsung Electro-Mechanics on the 8th, setting a target price of 240,000 KRW.

Samsung Electro-Mechanics' operating profit for the second quarter of this year is expected to increase by 3% year-on-year to 368.3 billion KRW. This aligns with the market consensus of 368.6 billion KRW. Despite the downturn in the Chinese smartphone market and inflation concerns, the company is expected to demonstrate stable profit-generating capabilities.

Researcher Kim Jisan of Kiwoom Securities analyzed, "Despite the forecast of record-high performance this year, the price-to-earnings ratio (PER) is at 9.5 times, which is the lowest valuation indicator ever, so attention should be paid to positive factors in the second half of the year."

Firstly, the package substrate is expected to expand production capacity focused on high value-added products by actively entering the server FC-BGA market and leading the supply of substrates for ARM-based M2 processors. The optical communication solution is securing a leading position in the autonomous driving camera market, and during the expansion of new foldable phone sales, an increase in camera pixel count along with price hikes is anticipated. Although inventory adjustments by Chinese smartphone manufacturers are prolonged for multilayer ceramic capacitors (MLCC), demand related to 5G, servers, and electric vehicles for industrial and automotive applications remains solid, and the effect of new Chinese smartphone model launches is expected to become visible in the third quarter.

Researcher Kim said, "Although news of Samsung Electronics adjusting its smartphone sales plan has been reported, the impact on Samsung Electro-Mechanics is limited mainly to mid- to low-end phones," adding, "However, it is necessary to recall that Samsung Electronics recorded its highest market share in five years last April amid the downturn in the Chinese smartphone market."

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