Brokerage : iM Securities
Analyst : Eui-young Ko (IT RA: Jeongha Park)
Investment Rating : BUY (Maintained)
Target Price : KRW 2,000,000 (Lowered)
Core Momentum : Long-term upward earnings revisions driven by severe AI server MLCC capacity cannibalization, broad 30% distribution price hikes, and strengthened substrate bargaining power against a 10-year average valuation reset
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained) / Target Price KRW 2,000,000 (Lowered from KRW 3,000,000, -33%) (Closing price KRW 879,000 as of July 30, 2026; upside potential 127.5%)
- Valuation Methodology: Applied a Target P/E multiple of 32x to 2028(E) EPS (KRW 61,761). The 32x target multiple represents an approximately 70% premium over the company’s 10-year historical average P/E of 19x, transitioning away from the previous global-peer-based valuation framework.
- Operating Profit Forecast Upgrades:
- Upwardly revised 2026–2028 operating profit estimates by +13%, +19%, and +19%, reaching KRW 1.9 Trillion, KRW 4.2 Trillion, and KRW 5.8 Trillion, respectively
- Key Financial Metrics & Forecast:
- Revenue (KRW): 2025 KRW 11.314 Trillion → 2026(E) KRW 14.327 Trillion → 2027(E) KRW 19.180 Trillion → 2028(E) KRW 22.152 Trillion
- Operating Profit (KRW): 2025 KRW 913.0 Billion → 2026(E) KRW 1.879 Trillion → 2027(E) KRW 4.239 Trillion → 2028(E) KRW 5.844 Trillion
- Net Profit (KRW): 2025 KRW 706.0 Billion → 2026(E) KRW 1.488 Trillion → 2027(E) KRW 3.474 Trillion → 2028(E) KRW 4.793 Trillion
- EPS (KRW): 2025 KRW 9,099 → 2026(E) KRW 19,177 → 2027(E) KRW 44,770 → 2028(E) KRW 61,761
- Valuation Multiples (PER / PBR / ROE):
- 2025: PER 28.0x, PBR 2.1x, ROE 7.7%
- 2026(E): PER 45.8x, PBR 6.2x, ROE 14.5%
- 2027(E): PER 19.6x, PBR 4.9x, ROE 28.0%
- 2028(E): PER 14.2x, PBR 3.8x, ROE 30.1%
- 2Q 2026 Results (2Q26):
- Revenue: KRW 3.46 Trillion, Operating Profit: KRW 440.3 Billion (beating consensus by +5% and +8%, respectively)
- Estimated OPM by division: Component 18%, Package 14%, Optics 4%
🚀 2. [Market Opportunities & Business Outlook]
- MLCC Segment (Price Hikes & Capacity Cannibalization):
- August 1 Price Hike: Implemented a +30% price hike across all product categories in distribution channels. Assuming a 70% contribution margin, this translates to an estimated ~10% improvement in total operating profit. Any volumes rejected by distributors will be redirected to high-value server direct supply.
- Server Market & Cannibalization: Global server MLCC market forecast at KRW 4 Trillion in 2027 (200B–270B units). With an exchange ratio of 1:3 against standard products, server MLCC production will cannibalize 12–15% of total commodity capacity, tightening industry supply.
- LTA Pipeline: In addition to the disclosed contracts on June 30 and July 23 (totaling KRW 749.1 Billion), ongoing LTA negotiations are proceeding with 10 Big Tech firms.
- FC-BGA Segment (Package Solutions):
- Pricing trends for existing and new projects are increasing sequentially each quarter, with 2Q26 operating margin estimated in the low-20% range.
- Substrate CapEx funding discussions with clients are taking the form of non-refundable grants rather than advance prepayments, confirming superior supplier pricing power.
- Mass production scheduled in 3Q26 for large-scale North American network substrates and next-generation ASIC/CPU substrates for existing clients.
- 3Q26 Corporate Outlook:
- Projected Revenue of KRW 3.8 Trillion and Operating Profit of KRW 591.4 Billion (revised up by +9% and +12%), driven by the full reflection of channel price hikes and new server platform volume shipments.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics as an essential hardware platform whose valuation multiples have temporarily mean-reverted to 10-year historical averages due to broader market sentiment, even as its fundamental supplier dominance and pricing power strengthen. This perspective looks past short-term multiple compression, focusing instead on structural margin drivers—such as the 30% across-the-board channel price hike, severe commodity capacity cannibalization (1:3 exchange ratio), and grant-based substrate co-investments.
To evaluate whether this investment thesis unfolds as anticipated, key verification checkpoints include the full realization of the August 30% channel price increase in quarterly earnings, the formal execution of LTAs with 10 Big Tech candidates, the achievement of ~KRW 590 Billion operating profit in 3Q26, and the scheduled ramp-up of large-scale North American network and ASIC/CPU substrates. Progress on these fronts can be tracked via upcoming quarterly earnings releases, investor relations materials, and official regulatory filings.
📢 Disclaimer & Source
Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
Investment Risk Notice: This content is provided for informational and linguistic reference purposes only. Under no circumstances does it constitute financial advice or a recommendation to buy or sell any specific securities. All investment decisions and financial responsibilities rest entirely with the investor.
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