Samsung Electro-Mechanics, Could It Rise from KRW 1.4 Million to KRW 2.2 Million? "AI Value-Chain Beneficiary"

[Financial News] Meritz Securities forecast that Samsung Electro-Mechanics will continue to see earnings improve as component demand grows with the expansion of the artificial intelligence (AI) market. It maintained its 'Buy' rating and raised its target price from KRW 2.1 million to KRW 2.2 million.
Yang Seungsoo, a researcher at Meritz Securities, said on the 23rd, "The key point is that earnings estimates continue to be revised upward despite the recent rapid shift toward an unfavorable exchange-rate environment."
Yang projected Samsung Electro-Mechanics' third-quarter revenue at KRW 3.8201 trillion, up 32.2% from a year earlier, and operating profit at KRW 657.1 billion, an increase of 152.4%. He forecast, "The effects of price increases across distribution channels, combined with an improved product mix centered on high-value-added AI products, will push the operating margin of the component division, which oversees the MLCC business, above 20% for the first time in 18 quarters since the first quarter of 2022."
He also identified rising demand for central processing units (CPUs) driven by the spread of agentic AI as an opportunity. Yang said, "MLCC applications have recently expanded from AI accelerators to server CPUs, and we understand that the company has already signed a long-term supply agreement with a North American CPU manufacturer. The order volume is also estimated to be comparable to that of ASIC (application-specific integrated circuit) customers."
He added, "Supply agreements are expected to expand to other CPU manufacturers in the future, supporting further growth in orders for AI-focused MLCCs."
ABF, a semiconductor package substrate, is also expected to benefit from growing CPU demand. 
Yang analyzed, "Following the signing of a large-scale CPU supply agreement with Meta in the first half of the year, demand for CPU-related ABF is expected to continue increasing. Supply volumes of sixth-generation server ABF substrates for a North American CPU manufacturer are also expanding at the Vietnam plant. Including PC-related volumes, the share of CPU-related products is estimated to exceed 45% of total ABF revenue."
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