Brokerage : Eugene Investment & Securities
Analyst : Joo-hyung Lee
Investment Rating : BUY (Maintained)
Target Price : KRW 360,000 (Raised)
Core Momentum : Earnings and profitability expansion projected across Component and Substrate divisions, driven by 4Q25 earnings resilience, rising CSP CapEx, rack-server growth, and product mix enrichment toward server/network applications
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained; Target Price raised from KRW 270,000 to KRW 360,000 (vs. current price of KRW 272,000).
- Valuation Methodology: Switched valuation multiple framework to P/E in consideration of favorable operating conditions and multi-year earnings expansion across Component and Package divisions, applying the 5-year historical 12MF P/E upper bound.
- 4Q25 Provisional Earnings Review:
- Revenue: KRW 2.9021 Trillion (+16% YoY, +0.5% QoQ).
- Operating Profit: KRW 239.5 Billion (+108% YoY, -8% QoQ, OPM 8.3%).
- Divisional Highlights: Package Solutions recorded high-single-digit operating margins on solid demand across BGA and FC-BGA. The Component division achieved double-digit 4Q operating margin for the first time since 2021, supported by high-margin mix improvements.
- Annual Financial Projections (2025P – 2026E):
- 2025P: Revenue KRW 11.314 Trillion / Operating Profit KRW 913.0 Billion / Net Profit KRW 731.0 Billion
- 2026E: Revenue KRW 12.290 Trillion / Operating Profit KRW 1.266 Trillion (revised up from KRW 1.084 Trillion) / Net Profit KRW 988.0 Billion
- 2027E: Operating Profit KRW 1.599 Trillion (revised up from KRW 1.306 Trillion)
- Key Financial Indicators (2026E):
- EPS: KRW 12,330 (+35.5% YoY)
- P/E: 22.1x / P/B: 2.0x
- ROE: 9.9% / EV/EBITDA: 8.4x
- Dividend Yield (2025F): 0.7%
🚀 2. [Market Opportunities & Business Outlook]
- MLCC Industry Transition & High-End Mix Enrichment:
- While Chinese smartphone makers’ annual shipment targets are being revised down by >20% due to memory supply constraints, declining IT volumes are being fully offset by high-margin server, network, and power MLCCs supported by ①continually rising CSP CapEx and ②expanding quarterly rack-server shipments.
- Top suppliers including Samsung Electro-Mechanics and Murata are reducing their dependence on and priority for consumer IT, while client OEMs are actively initiating LTA (Long-Term Agreement) requests and negotiations despite smartphone volume cuts.
- 4Q25 MLCC shipments declined in the high-single-digit range QoQ due to IT destocking, but inventory remained well-managed at 4–5 weeks.
- While broad-based MLCC shortages and unit price hikes have not yet been observed, continuous mix improvements are projected to expand the Component division’s 2026 operating margin by 3%p YoY compared to 2025.
- Package Solutions Division (FC-BGA):
- Demand strength sustained across both BGA and FC-BGA product lines.
- As server and network FC-BGA substrate shipments to new customer accounts begin in 2H26, annual Package Solutions operating margins are expected to approach double digits.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a conventional passive component supplier vulnerable to Chinese smartphone destocking, but as a critical AI hardware provider successfully executing a structural portfolio transition into high-margin server, network, and power applications backed by expanding CSP CapEx and rack-server architectures. Rather than focusing on consumer smartphone volume cuts, the analytical thesis places greater strategic significance on top-tier vendors deprioritizing consumer IT, set makers actively pursuing LTAs, the projected 3%p margin expansion in the Component division, and Package Solutions margins approaching double digits backed by new 2H26 server FC-BGA accounts.
To assess whether this investment thesis continues to materialize, key tracking points include the expansion of high-value server/network MLCC mix offsetting consumer IT weakness, progress in executing LTAs with set manufacturers, the commercial launch of server/network FC-BGA shipments to new client accounts in 2H26, and the progression toward achieving projected operating profit targets of KRW 1.266 Trillion in 2026 and KRW 1.599 Trillion in 2027. These variables can be verified through upcoming quarterly earnings releases, official company IR presentations, periodic regulatory filings (quarterly and annual reports), and DART disclosures.
📢 Disclaimer & Source
Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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