Samsung Electro-Mechanics Seen Heading Toward 3 Million Won as Brokerage Says Earnings Could Catalyze a Rebound

[Financial News] Brokerage analysts said Samsung Electro-Mechanics, which has fallen more than 40% from its recent peak, still has room to rebound. Based on the view that shortages of multilayer ceramic capacitors (MLCCs) and flip chip ball grid array (FCBGA) substrates could persist, Hana Securities maintained its "BUY" rating and target price of 3 million won.

Kim Min-kyung, an analyst at Hana Securities, said in a report on the 20th that comments from big tech companies and competitors ahead of the earnings release on the 30th could serve as a catalyst for the stock's rebound.
Kim cited limited supply capacity in both the MLCC and package solutions segments. She explained, "Given the lack of large-scale capacity expansion among MLCC suppliers, there is a high likelihood that margins will exceed past peak levels." She added, "The package solutions segment is also likely to face a prolonged supply shortage cycle, as the technical difficulty is rising sharply with the increasing performance of chips."
In the MLCC segment, she saw strong potential for an improvement in industry conditions. Murata Manufacturing Co., Ltd. and Samsung Electro-Mechanics have both kept MLCC utilization rates above 90% for four consecutive quarters, but no major capacity expansion by key suppliers has yet been confirmed. She said production of high-capacity, high-reliability MLCCs for AI servers is being prioritized, which is reducing actual supply capacity even for general-purpose products. With NVIDIA's new Rubin GPU architecture and the launch of the iPhone overlapping, she expects the supply shortage to widen further in the second half of the year.

FCBGA substrates were also identified as a segment likely to remain constrained. As AI accelerators become more powerful, package substrates are becoming larger and more multilayered, which sharply raises manufacturing difficulty. Even if global substrate makers move to expand capacity, the scope for supply growth is expected to remain limited.
The earnings outlook was also presented on the assumption of an upward revision cycle. Hana Securities forecast Samsung Electro-Mechanics' revenue at 13.4274 trillion won and operating profit at 1.714 trillion won for this year. For next year, it estimated revenue at 16.0783 trillion won and operating profit at 3.3918 trillion won, implying operating profit growth of 97.9% from a year earlier. The operating margin is projected at 12.8% this year and 21.1% next year.
[email protected] Han Seung-gon Reporter