[Click eStock] "Samsung Electro-Mechanics Expected to Benefit from AI... Target Price Raised"

Target Price Raised from 2.4 Million Won to 3 Million Won

On October 30, KB Securities raised its target price for Samsung Electro-Mechanics from 2.4 million won to 3 million won, citing expectations of a boom in the multilayer ceramic capacitor (MLCC) and packaging substrate industries driven by the rise of artificial intelligence (AI), as well as the resulting benefits for the company. The investment opinion was maintained as 'Buy'.

Lee Changmin, a researcher at KB Securities, explained, "The reason for raising the target price is that we have revised the average annual operating profit growth rate for the next five years from 9% to 14%, reflecting the surge in demand for high-value-added components driven by AI, the resulting increase in shipments, and improved product mix." He added, "We continue to view Samsung Electro-Mechanics as our top pick in the IT components sector."

In the third quarter of this year, Samsung Electro-Mechanics recorded sales of 2.89 trillion won, up 11% year-on-year, and operating profit of 260.3 billion won, up 12%, slightly exceeding the consensus (average of securities firms' forecasts). Lee analyzed, "This is the best performance in three years, driven by a rebound in demand for IT components in the MLCC and packaging substrate divisions due to seasonal peak effects, continued strong demand for AI server and automotive components, and solid performance in the camera module business."

Fourth-quarter results are expected to significantly exceed market expectations. Lee forecasted, "Samsung Electro-Mechanics' fourth-quarter results will reach sales of 2.81 trillion won, up 13%, and operating profit of 217.8 billion won, up 89%, significantly surpassing the consensus (operating profit of 178.9 billion won)." He explained, "As the proportion of high-value-added AI server and automotive components increases, the seasonality of IT components will be diluted, so the decline in sales volume due to inventory adjustments by downstream customers is expected to remain limited."

Along with the overall increase in sales volume, a strong improvement in product mix centered on high-value-added products is expected. Lee stated, "In particular, the MLCC business continues to operate at nearly 100% utilization, and if the company continues to shift production toward high-end products such as AI server and automotive components while reducing the share of low-end products, it will be able to narrow the profitability gap with its competitor, Murata."

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