[Click e-Stock] "Samwha Capacitor, Pace of Earnings Improvement Limited... Target Price Lowered"

Target Price Revised Down by 19% from Previous Level

On May 30, KB Securities revised its target price for Samwha Capacitor downward from 42,000 won to 34,000 won, citing that the pace of earnings improvement is expected to remain limited for the time being. The investment rating was maintained at 'Buy'.

Lee Changmin, an analyst at KB Securities, explained, "The reason for lowering the target price is that we have adopted a more conservative view of the medium- to long-term growth potential of IT-oriented (home appliances, memory semiconductors, etc.) multilayer ceramic capacitors (MLCC), due to the prolonged sluggishness in end-market demand. Accordingly, we have reduced the average return on equity (ROE) for 2025?2034 from the previous 11.6% to 10.4%."

In the first quarter of this year, Samwha Capacitor reported sales of 72.4 billion won, down 2% year-on-year, and operating profit of 4.8 billion won, down 32%, both falling short of the consensus (average of brokerage forecasts). Lee analyzed, "The expansion of automotive MLCC shipments to Chinese finished vehicle manufacturers and growth in sales of industrial MLCCs for renewable energy such as solar and wind power were positive factors. However, sluggish demand for IT devices has led to continued weak sales of MLCCs for memory semiconductors, and the high-margin film capacitor (FC) division also saw a temporary decline in sales, adversely affecting profitability."

Second quarter results are expected to show a slight improvement. Lee stated, "We estimate Samwha Capacitor's second quarter sales at 82.1 billion won, up 7%, and operating profit at 6.5 billion won, down 15%." He added, "We expect a modest improvement in IT-oriented MLCC demand due to seasonal peak effects (second and third quarters), and the FC division's performance is also expected to recover to normal levels."

The pace of earnings improvement is projected to remain limited for the time being. Lee said, "Due to the slow recovery of the IT-oriented MLCC market, the pace of Samwha Capacitor's earnings improvement will be limited for now." However, he also noted, "The ongoing trend of interest rate cuts in major countries is expected to boost consumer sentiment around late 2025 to early 2026, which should have a positive impact on demand for passive components." He continued, "In addition, the continued expansion of power infrastructure investments to support data centers, factories, and charging facilities?driven by the spread of artificial intelligence (AI) and electric vehicles?should also be noted, as this is expected to lead to rapid growth in demand for power MLCCs."

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