[Click e-Stock] "Samsung Electro-Mechanics Meets Earnings Expectations and Rises... Strong Performance in Automotive Components"

Kiwoom Securities maintained a 'Buy' rating on Samsung Electro-Mechanics on the 11th, setting a target price of 200,000 KRW.

Although Samsung Electro-Mechanics' stock price has been weak due to prolonged sluggish smartphone demand and concerns over the package substrate market downturn, its earnings are expected to meet market expectations and continue an upward quarterly trend. The reasons behind this include ▲ multilayer ceramic capacitors (MLCC) seeing increased preemptive inventory demand from customers as inventory adjustments have concluded, ▲ package substrates recovering from the downturn mainly in mobile and memory substrates, and ▲ all business divisions performing well in automotive product lines.

The estimated operating profit for the second quarter is 194.5 billion KRW. Despite ongoing uncertainties regarding set demand in the second half, it seems reasonable to emphasize gradual recovery based on a low base effect and peak season demand.

MLCC sales in the second quarter are expected to increase by 14% compared to the previous quarter, with operating profit margins recovering to double digits. The launch of new smartphone models in China is scheduled, and IT customers are expected to increase preemptive inventory ahead of the peak season. Automotive MLCCs are anticipated to sustain growth based on the expansion of electric and autonomous vehicles and competitiveness in the powertrain sector. Contributions from electronic components such as power inductors are also expected to expand.

The camera module segment is proactively responding to foldable phone demand from domestic and international customers, with an increase in supply of high-performance slim cameras expected. Steady growth in autonomous driving camera modules is also projected to continue. Package substrates are expected to show differentiated improvement compared to the industry in the second half. Seasonal demand for FC substrates for ARM processors, which Samsung Electro-Mechanics leads in supplying, is anticipated to increase. FC-BGA demand, mainly for PCs, is entering a recovery phase, and the new Vietnam plant is expected to begin full-scale operations. Sales of high-value-added, large-area FCBGA for servers, networks, and automotive sectors are expected to increase significantly.

Ji-san Kim, a researcher at Kiwoom Securities, analyzed, “Although sluggish smartphone demand and concerns over the package substrate market downturn are weighing on the stock price, earnings are expected to meet market expectations and continue an upward trend despite these concerns,” adding, “All business divisions’ automotive product lines are performing well.”

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