[Click eStock] "Smartphone Market Recovery... Samsung Electro-Mechanics Target Price Maintained"

Entering Recovery Phase in Smartphone Market
Expectations for Improved MLCC Demand Base

On the 4th, Kiwoom Securities maintained its "Buy" rating and target price of 180,000 KRW for Samsung Electro-Mechanics, stating that "as the smartphone market emerges from a prolonged slump and enters a recovery phase, the demand base for its core product, multilayer ceramic capacitors (MLCC), is also expected to improve."

On the same day, Kiwoom Securities analyst Kim Ji-san said, "We maintain our Q4 earnings estimates. Operating profit is expected to increase by 33% year-on-year to 134.4 billion KRW." He added, "Due to year-end inventory adjustments by major clients, the operating rates across all business units will decline. Weak demand continues for package substrates such as semiconductor substrates (FC BGA)," but he also noted, "We recommend a trading strategy focused on earnings improvement in the first half of next year."

In particular, the demand base for MLCC is expected to improve. The smartphone market has exited a long-term slump and entered a recovery phase, and distribution inventory of Chinese smartphone manufacturers has also decreased. From the latter part of Q1 next year, demand for inventory replenishment is expected to increase along with the effect of new smartphone models. Analyst Kim said, "On-device artificial intelligence (AI) functions are expected to be adopted in the flagship models of major clients," adding, "With improved application processor (AP) performance, the MLCC mounting capacity will increase." On-device AI refers to AI that can independently collect and process information within the device without a separate server. MLCCs for automotive electronics will continue their high-growth trend alongside the expansion of electric vehicles and autonomous driving, and are expected to reach trillion-KRW scale sales starting next year.

Although FC BGA struggled this year due to weak PC demand, with the operation of a new factory in Vietnam next year, performance is expected to accelerate in server and AI accelerator applications. For camera modules, demand for high-pixel folded zoom is increasing among domestic and international clients, and a sufficient order backlog for autonomous driving cameras is expected to translate into sales growth.

Analyst Kim stated, "After two years of declining profits, operating profit is expected to rebound by 31% next year to 869.2 billion KRW compared to this year," and "Quarterly operating profit is also expected to improve, with Q4 as the bottom, reaching 183.5 billion KRW in Q1 and 211.8 billion KRW in Q2 next year." He also added, "Global smartphone sales in October reached 110.34 million units, marking a return to growth after 28 months. Smartphone sales in China increased by 12% year-on-year to 22.82 million units, showing a meaningful rebound. During the two weeks of the recent Singles' Day, Chinese smartphone sales rose by 5% compared to the same period last year, which was also favorable."

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