"Samsung Electro-Mechanics Strengthens, Target Price Set at 3 Million Won"... Why Morgan Stanley Changed Its Top Pick

[Financial News] Morgan Stanley has named Samsung Electro-Mechanics its new top pick, replacing Samsung Electronics as its preferred investment target.

According to Yonhap News Agency on the 12th, Morgan Stanley upgraded Samsung Electro-Mechanics to its top pick, citing the potential for higher multilayer ceramic capacitor (MLCC) prices and a recovery in demand for Ajinomoto Build-up Film (ABF) substrates.
It maintained its overweight rating. The target price was raised from 2.56 million won to 2.62 million won.
Morgan Stanley said expanding investment in Artificial Intelligence (AI) data center projects will support demand for components. It added that Samsung Electro-Mechanics' margin and earnings per share (EPS) estimates are likely to exceed market consensus by a wider margin.
From the second half of this year through next year, advance orders from customers were cited as a factor supporting MLCC prices.
The share of AI-related businesses in Samsung Electro-Mechanics' revenue is expected to rise from 20% in 2026 to 31% in 2027. As AI revenue more than doubles, the company is seen as strengthening the foundation for sales and profit growth.
The ABF business was also highlighted as a growth driver. Samsung Electro-Mechanics has secured several orders related to AI chip substrates from U.S. application-specific integrated circuit (ASIC) makers, and its new plant in Vietnam is set to ramp up production through 2028. Morgan Stanley estimated that ABF revenue could grow four- to fivefold by 2030.
Rising technical complexity was presented as a reason for Samsung Electro-Mechanics' expanding market share. New ASIC chips are rapidly increasing in size and layer count, while multi-chiplet designs that combine multiple chips are also spreading. As more MLCCs are embedded in ABF to improve power stability, the company could strengthen its market position as product complexity increases, the report said.
A new product cycle centered on glass substrates could also begin from 2028. The firm also said the price cycles for silicon capacitors and ABF are moving more strongly and more quickly than previously expected.

Morgan Stanley said these growth prospects are not yet fully reflected in the current share price. It set the 2028 estimated price-to-earnings ratio (P/E ratio) at 18 times, noting that even with higher EPS growth, it remains well below the previous peak of 30 times.
The bull-case target price was kept at 3 million won. In contrast, the bear-case target price was cut to 1.35 million won to reflect greater volatility.


[email protected] Han Seung-gon Reporter