[Click eStock] "Samsung Electro-Mechanics, 4Q Demand to Plummet... Already Priced In, Target Price Maintained"

[Asia Economy Reporter Myunghwan Lee] Hana Securities announced on the 15th that it maintains a Buy rating and a target price of 175,000 KRW for Samsung Electro-Mechanics. This is because the company's Q4 earnings this year are expected to decline but have already been reflected in the stock price.

Hana Securities forecasts Samsung Electro-Mechanics' Q4 sales this year to decrease by 16% year-on-year to 2.0432 trillion KRW, and operating profit to plunge 53% to 148.2 billion KRW. Hana Securities explained that due to weaker-than-expected demand for IT products such as PCs and smartphones, sales forecasts for all business divisions are being revised downward.

By business segment, Hana Securities estimated that the Component Solutions division's profitability likely deteriorated as both price and volume fell short of expectations. The Optical Communication Solutions division also saw a significant sales decline due to year-end inventory adjustments. In the Package division, while Flip Chip Ball Grid Array (FC-BGA) performed well, the BGA segment was estimated to be affected by the sluggish smartphone market.

Hana Securities projects Samsung Electro-Mechanics' full-year sales to decrease 6% year-on-year to 8.9537 trillion KRW, and operating profit to decline 13% to 1.0746 trillion KRW. These figures represent downward revisions of 4% and 8%, respectively, compared to Hana Securities' previous estimates. The explanation is that the demand decline for IT sets is larger than expected due to customers' inventory. It was also added that companies increased inventory levels after supply chain risks caused by COVID-19 and are now in the process of reducing them again. They also diagnosed that the current perceived decline by parts suppliers is likely greater than the actual demand decrease.

Although Hana Securities lowered Samsung Electro-Mechanics' earnings forecast for next year, the downward revision is minimal at 8%, so the target price remains unchanged. Kim Rok-ho, a researcher at Hana Securities, analyzed, "Since the stock price has already anticipated the earnings downgrade, the risk of further price decline is limited," adding, "Now is a period requiring an investment strategy considering the completion of inventory adjustments in Chinese smartphones and China's reopening."

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