[Click eStock] Samsung Electro-Mechanics, Stock Price Reaches PBR 1.2x... Target Price ↓

Hi Investment & Securities announced on the 27th that it maintains a buy rating on Samsung Electro-Mechanics but lowers the target price from 180,000 KRW to 160,000 KRW. This is a downward revision compared to the previous historical average price-to-book ratio (PBR) of 1.7 times. While weak end-user demand is not a new fact, the MLCC price cuts to maintain market share are expected to impact profitability in 2024.

Go Eui-young, a researcher at Hi Investment & Securities, stated, "After the earnings announcement, the stock price plunged 13%, pushing the 12-month forward PBR down to 1.2 times," adding, "This is close to the historical low average PBR of 1.18 times and corresponds to the lower bound of the band excluding loss-making periods." He continued, "Therefore, the price adjustment appears to have occurred sharply in just one day," but added, "However, a period of adjustment may be necessary during the process of downward stabilization of expectations."

Since MLCC inventory has decreased, the possibility of a sharp drop in operating rates is low. The key issue is whether IT end-user demand will recover going forward. If a direction is established, Go believes attention can return to automotive MLCC and the structural increase in the high-value-added FC-BGA segment.

MLCC shipments improved in the second quarter, mainly driven by some Chinese mobile and PC demand, and were estimated to have improved by about 15% compared to the previous quarter in the third quarter as well. However, since front-end companies remain cautious about demand, another inventory adjustment is expected in the fourth quarter. MLCC’s ASP fell by 5%, faster than expected, due to measures taken to maintain market share against Japanese companies in a weak yen environment. This appears to be the main cause of the decline in component profitability.

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