Brokerage : Shinhan Securities
Analyst : Oh Kang-ho, Seo Ji-beom
Investment Rating : BUY (Maintained)
Target Price : KRW 700,000 (Raised)
Core Momentum : Structural earnings growth and valuation re-rating projected on the back of rising component capacity utilization and ASP expansion driven by the AI cycle
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained; Target Price raised by 40% to KRW 700,000 (Upside: 36.2%).
- Valuation Methodology: Applied a target P/E multiple of 34.8x (a 15% premium over the 2023 peak P/E) to 2027F EPS of KRW 19,967 (+33% revision).
- 1Q26 Earnings Preview:
- Revenue: +12% YoY (revised estimate of KRW 3.0575 Trillion).
- Operating Profit: KRW 268.7 Billion (+34% YoY; revised down 8.6% from previous estimate due to one-off expenses).
- Operating Margin (OPM): Forecast at 8.8% (+1.5%p YoY).
- Segment Revenue Growth: Component +12% YoY, Package Substrate +38% YoY.
- Annual Financial Projections (2026F – 2028F):
- 2026F: Revenue KRW 13.1617 Trillion (raised) / Operating Profit KRW 1.477 Trillion (raised) / Controlling Net Profit KRW 1.2314 Trillion (raised)
- 2027F: Revenue KRW 14.9045 Trillion (raised) / Operating Profit KRW 1.9545 Trillion (raised) / Controlling Net Profit KRW 1.559 Trillion (raised)
- 2028F: Revenue KRW 17.1008 Trillion / Operating Profit KRW 2.4436 Trillion / Controlling Net Profit KRW 1.9091 Trillion
- Key Financial Multiples (2026F):
- P/E: 32.6x (vs. Murata at 33.1x and substrate peer average at 57.7x)
- P/B: 3.8x
- ROE: 12.3%
- EV/EBITDA: 13.2x
- Dividend Yield (DY): 0.6%
🚀 2. [Market Opportunities & Business Outlook]
- AI Cycle & Demand-Supply Dynamics:
- Transition into a structural AI cycle with expanded intensity and timelines, creating a demand-outpacing-supply environment.
- Growth driver transitioning from volume-driven (Q) to price-driven (P) expansion anchored by high-value product sales and ASP gains.
- Component Division (MLCC):
- Capacity utilization trend: 70% in 2023 → estimated ~93%+ in 2025 → projected ~95% in 2026.
- Expanding mix of high-value products supporting expectations for continued Blended ASP improvements.
- Package Solution Division (FC-BGA):
- Rising Big Tech demand creating favorable conditions for broad-based pricing increases.
- Maintaining outlook for stronger performance in the second half of the year (H2-heavy seasonality).
- Global Valuation Re-rating:
- Component and package substrate divisions collectively account for ~90% of total operating profit, justifying multiple expansion toward global peer levels (global substrate peer average P/E at ~58x).
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a conventional components vendor subject to consumer IT hardware cycles, but as a premier global AI beneficiary capable of price-led (P) growth through rising utilization and high-value product mix upgrades. The underlying analytical thesis places greater strategic significance on sustaining mid-90% utilization rates in a tight demand-supply environment and the resulting pricing power across core component and substrate businesses, rather than short-term one-off cost impacts.
To assess whether this investment thesis continues to materialize, key tracking points include the Component division sustaining capacity utilization around 95%, the realization of second-half earnings acceleration in Package Solutions supported by Big Tech demand, and the extent to which AI-driven ASP expansion translates into achieving projected annual operating profit (KRW 1.47 Trillion+). These developments can be verified through upcoming quarterly earnings releases, official company IR presentations, periodic regulatory filings (quarterly and annual reports), and DART disclosures.
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