Brokerage : IBK Investment & Securities
Analyst : Woon-ho Kim
Investment Rating : BUY (Maintained)
Target Price : KRW 330,000 (Maintained)
Core Momentum : Multi-year earnings acceleration projected on the back of 4Q25 earnings beat, broad-based sequential top-line growth across all divisions in 1Q26, rising Non-IT MLCC mix, and margin expansion in server/AI ASIC substrates
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained; Target Price maintained at KRW 330,000 (vs. current price of KRW 272,000).
- Valuation & Target Price Rationale: Reflects full-scale operating profit improvements starting 1Q26, projected 2026 annual operating profit expansion of >40% YoY, expanding Non-IT MLCC revenue contribution, and margin gains from server/AI ASIC substrate mix.
- 4Q25 Provisional Earnings Review:
- Revenue: KRW 2.9021 Trillion (+0.5% QoQ; slightly exceeding previous expectations).
- Division QoQ Revenue Performance: Optics +2.5%, Package Solutions +8.7%, Component -4.4%.
- Operating Profit: KRW 239.5 Billion (-8.0% QoQ; slightly exceeding previous expectations).
- 1Q26 Earnings Forecast:
- Revenue: KRW 3.0482 Trillion (+5.0% QoQ; broad-based sequential growth expected across all business divisions).
- Division QoQ Revenue Growth Projections: Package Solutions +5.3%, Component +3.5%, Optics +7.0%.
- Operating Profit: KRW 287.4 Billion (+20.0% QoQ; driven by combined revenue growth and operating margin expansion).
- Division Operating Margin Projections: Package Solutions rising to ~9%, Component expanding up to ~12%, Optics at 6.5%.
- Annual Financial Projections (2025F – 2027F):
- 2025F: Revenue KRW 11.314 Trillion / Operating Profit KRW 913.0 Billion / Controlling Net Profit KRW 674.0 Billion
- 2026F: Revenue KRW 12.371 Trillion / Operating Profit KRW 1.324 Trillion / Controlling Net Profit KRW 1.022 Trillion
- 2027F: Revenue KRW 12.487 Trillion / Operating Profit KRW 1.162 Trillion / Controlling Net Profit KRW 877.0 Billion
- Key Financial Indicators (2026F):
- EPS: KRW 13,169 (revised up from KRW 12,219; +51.5% YoY)
- P/E: 20.7x / P/B: 2.1x
- ROE: 10.4% / EV/EBITDA: 8.8x
- Operating Margin (OPM): 10.7% / Net Margin: 9.1%
🚀 2. [Market Opportunities & Business Outlook]
- Diminishing Seasonality in 4Q25 Results:
- Quarterly earnings seasonality structurally faded as 4Q revenue expanded QoQ despite traditional year-end off-seasons.
- Sequential revenue expansion in Optics and Package Solutions offset the Component division’s contraction, defending overall earnings.
- Component Division (MLCC):
- Consistent upward trajectory in Non-IT (automotive and industrial) MLCC mix, driving product portfolio enrichment and structural profitability improvements.
- Operating margin in the Component division is projected to reach up to ~12% in 1Q26.
- Package Solution Division (FC-BGA & AI ASIC):
- Entering an expansionary phase where rising server and AI ASIC substrate mix drives simultaneous top-line and margin improvements.
- Package Solutions operating margin is expected to expand into the 9% range in 1Q26.
- Optics & Communication Division:
- Supported by new product momentum, 1Q26 revenue is projected to rise +7.0% QoQ with an operating margin of 6.5%.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a conventional passive component maker vulnerable to consumer IT demand seasonality, but as a critical AI hardware provider successfully neutralizing off-season volatility through structural mix shifts toward servers, automotive, and AI ASICs. Rather than focusing on fourth-quarter seasonal contractions, the analytical thesis places greater strategic significance on all business divisions achieving sequential revenue growth in 1Q26 to generate KRW 287.4 Billion in operating profit (+20% QoQ), Package Solutions margin reaching the 9% range on expanding AI ASIC allocations, and 2026 full-year operating profit growing over 40% YoY.
To assess whether this investment thesis continues to materialize, key tracking points include achieving sequential top-line growth across all divisions and the projected 1Q26 operating profit (KRW 287.4 Billion), sustained expansion of Non-IT MLCC revenue contribution, and Package Solutions solidifying operating margins in the 9% range on server/AI ASIC demand alongside achieving projected 2026 annual operating profit (KRW 1.32 Trillion). 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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