[Click eStock] "Samsung Electro-Mechanics, Earnings Already Passed Bottom... Expecting Recovery in Chinese Mobile Demand"

On the 13th, Kiwoom Securities maintained a 'Buy' rating on Samsung Electro-Mechanics and set a target price of 200,000 KRW.

Samsung Electro-Mechanics 200 Million Pixel OIS Camera Module

Samsung Electro-Mechanics' operating profit for the second quarter is expected to be 194.5 billion KRW. This represents a 39% increase compared to the previous quarter but a 46% decrease compared to the same period last year. Although flip chip ball grid array (FC-BGA) is expected to perform weaker than initially anticipated, stacked multilayer ceramic capacitors (MLCC) and camera modules are expected to achieve solid results to offset this.

Monthly smartphone data indicates signs of inventory normalization in China. The distribution inventory of smartphones for the three Chinese OVX companies in April decreased by 6% year-on-year. The Chinese smartphone market in April recently saw its contraction narrow to -2%, and it is expected to shift to growth soon after a prolonged slump. This contrasts with the recent notable weakness in U.S. demand and the high inventory levels in India.

Researcher Kim Jisan of Kiwoom Securities analyzed, “MLCC shipments for Chinese mobile and IT use are increasing, improving utilization rates and profitability. Along with the effect of new smartphone model launches in China, IT customers are also proactively securing inventory ahead of the peak season in the second half of the year.”

Researcher Kim added, “Samsung Electro-Mechanics is increasing its market share in automotive MLCC by expanding its product lineup.”

Regarding package substrates, mobile and memory BGA product lines are recovering from severe downturns, but FC-BGA recovery is delayed due to weak PC demand. In the second half of the year, favorable conditions are expected with increased demand for mobile products such as FC-CSP and AiP driven by flagship smartphone launches, seasonal strength in FC substrates for ARM processors, and the operation of a new FC-BGA factory in Vietnam.

Camera modules are also maintaining solid performance. In the second and third quarters, shipments of high-performance slim cameras for foldable phones by domestic and overseas customers will increase. If demand from Chinese customers recovers, the sales structure of camera modules is expected to stabilize further. Autonomous driving cameras have secured a leading position, especially centered on electric vehicles.

Researcher Kim forecasted, “We believe the performance has already passed its bottom. Since Samsung Electro-Mechanics benefits greatly from operating leverage during the IT set demand recovery, the improvement trend led by MLCC will continue into the third quarter.”

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