Brokerages have once again raised their price target for Samsung Electro-Mechanics (009150.KS), whose shares have surged more than 1,000% over the past year. iM Securities lifted its target price to 2.3 million won from 1.8 million won, calling the company a leading components stock set to directly benefit from growth in the artificial intelligence (AI) industry.
"Samsung Electro-Mechanics is a representative AI component stock that can benefit simultaneously from its multilayer ceramic capacitor (MLCC) and flip-chip ball grid array (FC-BGA) businesses," analyst Ko Eui-young of iM Securities said in a report Tuesday. "There is a high likelihood that further upward revisions to earnings forecasts will continue through additional price increases and an expansion of silicon capacitor (SiCap) orders."
Ko assessed that the company's valuation remains undervalued. "Considering actual profit growth, Samsung Electro-Mechanics' price/earnings-to-growth (PEG) ratio for next year is 0.4 times," he explained. "This is significantly lower than the 2.1-times average for MLCC makers and the 0.9-times average for package makers."
He also sharply raised his earnings outlook. He estimated that Samsung Electro-Mechanics' operating profit would reach 3.3 trillion won next year and 4.3 trillion won in 2028. These figures represent increases of 110% and 32% from the previous year, respectively.
"We are forecasting next year's operating profit at 3.3 trillion won, assuming the current MLCC price increase of around 20%, but the possibility of a further upward revision remains open," Ko said.
"Server MLCC prices were initially expected to rise first, but general-purpose MLCC prices began climbing first, with second-tier makers such as Yageo leading the price increases," he said. "As the strength and persistence of the industry cycle are greater than in the past, the scale of price increases could also exceed previous cycles."
He added, "Samsung Electro-Mechanics has a high proportion of direct-supply customers, so price increases on the same level as second-tier makers are not easy. But the more competitors expand their price increases, the more likely it is that its bargaining power with customers will also strengthen."
He also said, "The third quarter will be an important inflection point, as it coincides with entry into the IT peak season and the mass production of Nvidia's next-generation AI platform, Vera Rubin." He forecast, "Apple's production plans are firmer than expected, and Vera Rubin servers carry a significantly larger MLCC content per rack than previous generations, which will work positively for improving supply and demand."
