Brokerage : Hana Securities
Analyst : Min-kyung Kim
Investment Rating : BUY (Maintained)
Target Price : KRW 550,000 (Raised)
Core Momentum : Earnings expansion and valuation re-rating projected on the back of surging B2B AI server demand for MLCC and FCBGA, tight supply dynamics, and potential broad-based price increases
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained; 12-month Target Price raised to KRW 550,000 (Upside: 26% vs. current price of KRW 437,000).
- Valuation Methodology: Applied a target P/E multiple of 37.5x (a 50% premium over the 5-year historical PER band upper bound) to 2026F EPS of KRW 14,587.
- 1Q26 Earnings Forecast (Preview):
- Revenue: KRW 3.0411 Trillion (+11% YoY, +5% QoQ).
- Operating Profit: KRW 263.3 Billion (+31% YoY, +10% QoQ, OPM 8.7%).
- Highlights: Reflecting one-off costs, operating profit was revised down by 9% from previous estimates; excluding the one-off impact, underlying operating profit is estimated to exceed KRW 300 Billion.
- Annual Financial Projections (2026F):
- Revenue: KRW 12.9831 Trillion
- Operating Profit: KRW 1.3953 Trillion (+6% upward revision)
- Pre-tax Profit: KRW 1.4136 Trillion
- Net Profit: KRW 1.1320 Trillion
- Key Financial Multiples (2026F):
- EPS: KRW 14,587 (+60.31% YoY)
- P/E: 29.96x
- P/B: 3.19x
- ROE: 11.30%
- EV/EBITDA: 14.01x
- BPS: KRW 137,148
- DPS: KRW 2,350
🚀 2. [Market Opportunities & Business Outlook]
- AI Server Demand & Sustained Seller’s Market:
- Entering a structural growth phase for AI server MLCC and FCBGA, securing growth visibility through 2027.
- AI accelerator spec upgrades require higher MLCC and FCBGA technical specifications, increasing processing load and exacerbating supply tightness.
- Unlike past consumer-driven cycles, the current upcycle is anchored by B2B enterprise demand, supporting extended cycle duration and valuation premium justification.
- Component Division (MLCC):
- Capacity utilization remains above 90% despite 1Q being a slow season, with inventory levels dropping to ~4 weeks.
- Pricing policy shifts observed among Japanese peers, including Murata’s inductor price hikes.
- Anticipating tighter supply conditions and potential broad-based price increases starting in 2Q26 as IT set makers accelerate inventory build-up.
- Package Solutions Division (FCBGA):
- Severe shortages driven by substrate size enlargement and higher layer counts in AI accelerators, resulting in substantial practical Capa Loss.
- The analyst expects additional capacity expansion needs to emerge by 2H26 due to lack of spare capacity.
- Secured multiple new accounts including NVSwitch, driving a steep increase in AI revenue contribution within Package Solutions starting in 2H26.
- Optics & Communication Division:
- Sequential revenue growth projected despite memory cost pressures, supported by flagship launch effects from strategic customer accounts.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a passive component maker exposed to consumer IT volatility, but as a critical AI hardware provider capturing long-term seller’s market positioning driven by processing load increases and enterprise B2B infrastructure demand. Rather than focusing on short-term first-quarter one-off costs, the analytical thesis places greater strategic significance on 90%+ utilization during seasonal troughs, reduced MLCC inventory days (~4 weeks), and the potential realization of broad-based price increases in tight AI hardware supply chains.
To assess whether this investment thesis continues to materialize, key tracking points include the actual realization of MLCC price hikes alongside 2Q IT inventory rebuilds, the expanding share of AI revenue in Package Solutions following NVSwitch substrate shipments in 2H26, and the potential announcement of additional FCBGA CapEx to resolve spare capacity constraints. These variables 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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