Brokerage : Shinhan Securities
Analyst : Oh Kang-ho, Seo Ji-beom
Investment Rating : BUY (Maintained)
Target Price : KRW 1,000,000 (Raised)
Core Momentum : Structural earnings growth and valuation re-rating driven by rising high-value product mix, expanding capacity utilization, and ASP upside momentum amid the expansion of the AI market
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained, Target Price raised by 43% to KRW 1,000,000 (Upside: 20.2%).
- Valuation Methodology: Applied a Target P/E of 41.2x (+18% adjustment, premium applied to historical high) to 2027F EPS (+22% revision).
- 1Q26 Earnings Review:
- Revenue: +17% YoY
- Operating Profit: +40% YoY (Operating Profit Margin: 8.7%, +1.4%p YoY)
- Note: Earnings exceeded consensus estimates despite reflecting a KRW 71.4 Billion one-off retirement benefit expense (normalized OPM estimated at ~11%).
- Annual Earnings Forecasts (2026F – 2028F):
- 2026F: Revenue KRW 13.5236 Trillion / Operating Profit KRW 1.569 Trillion / Controlling Net Profit KRW 1.3401 Trillion
- 2027F: Revenue KRW 15.7473 Trillion / Operating Profit KRW 2.3427 Trillion / Controlling Net Profit KRW 1.898 Trillion
- 2028F: Revenue KRW 18.3261 Trillion / Operating Profit KRW 2.9977 Trillion / Controlling Net Profit KRW 2.3703 Trillion
- Key Financial Multiples (2026F):
- P/E: 48.5x
- P/B: 6.1x
- ROE: 13.3%
- EV/EBITDA: 20.8x
- Dividend Yield (DY): 0.3%
🚀 2. [Market Opportunities & Business Outlook]
- Component Division:
- 1Q26 revenue grew +16% YoY (beating expectations by 4%).
- Growth led by expanding sales of high-value AI and automotive products (~23% of division revenue).
- Division capacity utilization is projected to reach ~95% in 2026, up significantly from ~70% in 2023.
- Continued upside anticipated for high-value product mix and Blended ASP.
- Package Solution Division:
- 1Q26 revenue grew +45% YoY (beating expectations by 5%).
- FC-BGA accounts for an estimated 55–60% of total package division revenue.
- Benefiting from surging Big Tech demand and broad pricing power across substrate product lines.
- Shipments of new network substrates to a major Big Tech client scheduled to commence in 2Q26.
- Industry Dynamics & Global Re-Rating:
- Industry cycle is shifting from quantity-driven (Q) growth to price-driven (P) expansion led by high-value product demand and ASP gains.
- Valuation re-rating gaining traction alongside global peers (Murata 2026F P/E at 42.3x; global substrate peer average at 76.5x).
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a conventional components vendor tethered to overall hardware shipment volumes (Q), but as a primary global AI beneficiary possessing structural pricing power (P) through high-value product mix expansion. The underlying perspective emphasizes that tight supply-demand conditions are driving structural utilization gains and product mix upgrades, resulting in high-quality earnings momentum differentiated from past cycles.
To assess whether this investment thesis continues to materialize, key tracking points include the sustainability of the ~95% utilization level in the Component division, the commercial shipment ramp-up of new network substrates to Big Tech clients starting in 2Q26, and the expansion of AI/automotive revenue portions translating into sustained gross margin and ASP improvements. These developments can be monitored through future quarterly earnings releases, official company IR materials, periodic reports (quarterly, semi-annual, and annual filings), and DART regulatory disclosures.
📢 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.
Contact: Compliance and Copyright Inquiries (ksb220805@gmail.com)
