NH Investment & Securities on Tuesday maintained its "buy" rating on Samsung Electro-Mechanics (009150) and raised its price target to 1.5 million won from 1 million won. Samsung Electro-Mechanics shares have more than quadrupled this year, but the brokerage sees significant further upside.
According to the Korea Exchange, Samsung Electro-Mechanics shares were trading at 1.092 million won, up 68,000 won, or 6.64%, from the previous session. With the stock starting the year at around 250,000 won, it has more than quadrupled.
In a report released Tuesday, NH Investment & Securities analyst Hwang Ji-hyun said, "As price hikes have begun on some multilayer ceramic capacitor (MLCC) products, we have raised our earnings estimates and, factoring in synergies with the package solutions division, expanded the valuation premium for the components division to 50% from 30%."
MLCCs are ultra-small components that store electricity inside electronic devices and supply it stably when needed. Demand for high-performance MLCCs has been rising rapidly with the recent expansion of the AI server and electric vehicle markets.
"We understand the company plans to raise prices on some MLCCs sold through distributors," Hwang said. "Given the recent supply-demand environment, price hikes are likely to spread to other product categories going forward."
She added, "Japan's Murata and Taiyo Yuden, the leading players, posted first-quarter book-to-bill ratios of 1.36 and 1.31, respectively, the highest in five years since 2021. Both companies noted that AI-related MLCC demand remains strong and that utilization rates are expected to stay above 90% throughout the year."
Hwang also noted, "Taiwan's Yageo and Walsin are showing similar trends, with their shares hitting the daily upper limit in the previous session."
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