"It jumped from 110,000 won to 1 million won, and now it could reach 1.5 million?" Samsung Electro-Mechanics rides the AI cycle

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[The Financial News] After Samsung Electro-Mechanics became a so-called “imperial stock” on the 13th, with shares trading above 1 million won each, domestic brokerages raised their target prices to as much as 1.5 million won.
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On the 14th, SK Securities raised its target price for Samsung Electro-Mechanics to 1.5 million won and maintained its “buy” rating. It forecast operating profit of 1.57 trillion won this year and 2.0353 trillion won next year, saying there is significant room for further upward revisions thanks to growth in the AI component segment.
Park Hyung-woo, an analyst at SK Securities, said, "This FC-BGA (Flip-Chip Ball Grid Array) cycle is stronger than the one five years ago." He added, "Profitability is improving sharply thanks to higher-layer, larger-area, and ultra-fine circuitry, and we also expect an MLCC (Multilayer Ceramic Capacitor) shortage in the second half, along with price increases for the same products."
Park also said, "Visibility on investment support for big tech customers has improved significantly. As support for the early investment phase based on long-term supply contracts becomes more concrete, confidence in the cycle’s durability has increased." He added, "Uncertainty has eased, and the company’s product lineup being top-tier in global components is the basis for a revaluation."
He went on to say that "the urgency of North American CPU companies to secure substrates has recently become apparent across the value chain" and that "Samsung Electro-Mechanics is the biggest direct and indirect beneficiary in Korea."
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KB Securities also raised its target price for Samsung Electro-Mechanics to 1.4 million won in a report released the same day. Analyst Lee Chang-min explained that the increase reflected a higher estimate for the company’s five-year operating profit CAGR, which was raised from 49% to 53% on expectations of strong earnings growth driven by the AI Supercycle.
KB Securities estimated Samsung Electro-Mechanics’ second-quarter sales at 3.33 trillion won and operating profit at 407.3 billion won. That would represent increases of 19% and 91%, respectively, from a year earlier. Lee said, "The twin engines of MLCC and FCBGA, both benefiting from the AI Supercycle, are likely to post profitability that exceeds market expectations." He added, "Even after a 304% surge from the start of the year, there is still plenty of room for earnings to improve."
Samsung Electro-Mechanics is seeing its valuation re-rated as demand for high-value-added semiconductor package substrates and MLCCs rises with the spread of AI infrastructure.
bng@fnnews.com Kim Hee-sun Reporter