Samsung Electro-Mechanics Continues to 'Level Up' on AI Component Demand; Target Price Set at 2.8 Million Won

[Financial News] Daol Investment & Securities forecast that Samsung Electro-Mechanics will continue to post steep earnings growth as higher prices for multilayer ceramic capacitors (MLCCs) coincide with a large-scale expansion of its flip-chip ball grid array (FC-BGA) capacity.
With third-quarter operating profit expected to exceed market expectations, the brokerage maintained its Buy rating and fair value at 2.8 million won.
On the 29th, Kim Yeon-mi, a researcher at Daol Investment & Securities, estimated that Samsung Electro-Mechanics would post third-quarter revenue of 3.9347 trillion won, up 36.2% year on year, and operating profit of 676.2 billion won, up 159.8%. The expected operating margin is 17.2%, approximately 11.8% above the market consensus of 605.1 billion won.
The brokerage analyzed that larger-than-expected MLCC price hikes would drive earnings improvement despite the earnings drag caused by a weaker exchange rate. It forecast that the average selling price (ASP) of MLCCs would rise by around 10% in the low teens quarter on quarter in the third quarter.
Profitability in the Components division is expected to improve. Kim forecast, "The timing of contract renewals for low-margin automotive products coincided with competitors' production discontinuation (EOL), creating a supplier-led pricing negotiation environment," adding, "Additional profitability improvement will be possible from the first quarter of next year, when the increases in direct-supply prices are reflected."
The Package Solution division is also expected to achieve an operating margin in the 30% range as the share of high-margin products for servers and networking applications expands to more than 60%. The brokerage said that rising demand for high-performance semiconductor substrates driven by increased investment in AI infrastructure would serve as the foundation for earnings growth.
The previous day, Samsung Electro-Mechanics decided to invest 4.27 trillion won in expanding package-substrate capacity at its Sejong Plant and 2.51 trillion won in equipment at its Vietnamese production subsidiary. Including investments excluded from the disclosure, total FC-BGA-related investment through 2028 is estimated to approach 10 trillion won.
The brokerage forecast that the financial burden from the large-scale investment would be limited. Around 70% of the total investment is expected to come in the form of customer support funds, while volume visibility from 2028 onward has been secured, meaning utilization pressure after the expansion is unlikely to be significant. The business mix's shift toward high-value-added substrates for servers and networking applications is also expected to contribute to improved profitability over the medium to long term.
Daol Investment & Securities raised its annual operating profit estimates for Samsung Electro-Mechanics to reflect the effects of MLCC price hikes and FC-BGA capacity expansion. It forecast operating profit of 2.16 trillion won in 2026, 4.674 trillion won in 2027, and 6.543 trillion won in 2028. These figures are 9%, 15%, and 16% higher, respectively, than its previous estimates.
Kim analyzed that Samsung Electro-Mechanics' earnings growth foundation had strengthened further as MLCC price hikes and large-scale capacity expansion proceeded simultaneously. She explained that, amid structural growth in the AI infrastructure market, both the prices and supply volumes of high-value-added components are expanding, making the company's medium- to long-term earnings improvement trend worth watching.

[email protected] Kang Jung-mo Reporter