Brokerage : Hana Securities
Analyst : Rok-o Kim, Min-kyung Kim (RA)
Investment Rating : BUY (Maintain)
Target Price : KRW 185,000 (Maintain)
Core Momentum : Sequential profit rebound in 1Q24 driven by flagship smartphone launches following a subdued 4Q23, with room for upside as recovery spreads across PC, server, and automotive in 2H24
📊 1. [Valuation & Key Financial Metrics]
Target Price & Valuation Basis
- Maintained BUY rating with a Target Price of KRW 185,000
- Current price (Jan 31, 2024): KRW 139,600
- Target price maintained despite a 16% downward revision to 2024 operating profit forecasts (reflecting 4Q23 earnings miss and substrate margin softness), supported by re-rated valuation multiples among global peer MLCC and substrate makers
Financial Forecast & Key Metrics (K-IFRS Consolidated)
- 2021: Revenue KRW 9.675T, Operating Profit KRW 1.487T, Pre-tax Profit KRW 1.491T, Net Profit KRW 892B, EPS KRW 11,500, P/E 17.17x, P/B 2.23x, ROE 14.29%
- 2022: Revenue KRW 9.425T, Operating Profit KRW 1.183T, Pre-tax Profit KRW 1.187T, Net Profit KRW 981B, EPS KRW 12,636, P/E 10.33x, P/B 1.32x, ROE 13.75%
- 2023(F): Revenue KRW 8.909T, Operating Profit KRW 639B, Pre-tax Profit KRW 543B, Net Profit KRW 428B, EPS KRW 5,518, P/E 27.76x, P/B 1.47x, ROE 5.54%
- 2024(F): Revenue KRW 9.882T, Operating Profit KRW 828B, Pre-tax Profit KRW 746B, Net Profit KRW 545B, EPS KRW 7,021, P/E 19.88x, P/B 1.28x, ROE 6.71%
4Q23 Review & 1Q24 Outlook
- 4Q23 Results: Revenue KRW 2.310T (+17% YoY, -2% QoQ), Operating Profit KRW 110.4B (+9% YoY, -40% QoQ)
- 1Q24 Outlook (E): Revenue KRW 2.390T (+18% YoY, +4% QoQ), Operating Profit KRW 157.6B (+13% YoY, +43% QoQ)
🚀 2. [Market Opportunities & Business Outlook]
4Q23 Segment Review
- Optical Solutions: Robust top-line supported by flagship ramp-up preparations for Galaxy S24 and Chinese customers alongside expanded automotive camera module sales
- Component: Unfavorable product mix from higher smartphone MLCC volume weighed on profitability
- Package Substrate: Margins impacted by prolonged PC demand weakness in FC-BGA and year-end order cuts from server clients
1Q24 Drivers & 2H24 Growth Trajectory
- 1Q24 Profit Rebound: Driven by flagship launches from key domestic and Chinese customers; strong pre-orders for the Galaxy S24 on heightened on-device AI interest provide potential upside to estimates
- MLCC: Modest recovery post year-end inventory digestion, with full volume recovery projected starting in 2Q24
- Package Substrate: Customer order intensity expected to be stronger in 2H24 compared to 1H24, concentrating earnings contribution in the second half
- Application & Client Diversification: Recovery trend expected to expand from smartphones to PC, server, and automotive applications in 2H24, backed by ongoing client and end-market diversification in MLCCs and package substrates
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics as a company emerging from temporary 4Q23 profitability headwinds into a sequential quarterly earnings recovery cycle initiated by new flagship smartphone rollouts. Despite adjusting 2024 annual earnings estimates due to near-term substrate softness, this perspective places greater weight on positive initial responses to on-device AI flagships, global peer valuation multiple expansion, and potential demand recovery broadening into PC, server, and automotive segments in 2H24.
To verify the execution of this investment thesis going forward, key checkpoints include monitoring whether 1Q24 flagship launch momentum successfully transitions into volume growth for MLCCs in 2Q24, whether 2H24 package substrate orders from server clients materialize as anticipated, and whether customer diversification across non-smartphone end-markets continues to expand. These developments can be tracked through upcoming quarterly earnings releases, official IR presentations, and periodic regulatory filings.
📢 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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