Brokerage : iM Securities
Analyst : Eui-young Ko
Investment Rating : Buy (Maintained)
Target Price : KRW 350,000 (Maintained)
Core Momentum : Earnings upward revisions projected on the back of 4Q25 earnings beat, rapid mix enrichment toward server/automotive applications, set makers’ MLCC LTA requests, and pulled-forward full utilization in FC-BGA supported by major U.S. Big Tech order wins
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Buy maintained; 12-month Target Price maintained at KRW 350,000 (Upside: 28.7% vs. current price of KRW 272,000).
- Valuation Methodology: Targeted historical peak P/B multiples observed during the 2018 and 2021 upcycles.
- 4Q25 Earnings Review:
- Revenue: KRW 2.9 Trillion
- Operating Profit: KRW 239.5 Billion (+4% vs. consensus).
- Divisional Outperformance: ① MLCC utilization stayed in the low-90% range (+2–3%p vs. initial model), ② FC-BGA operating margin achieved 11–12% (+2–3%p vs. initial model) backed by server demand, ③ Camera modules recorded 4–5% margin during a seasonal trough.
- 1Q26 & 2026 Annual Earnings Projections:
- 1Q26 Operating Profit: KRW 278.7 Billion (+11% upward revision).
- 2026E Revenue: KRW 12.682 Trillion
- 2026E Operating Profit: KRW 1.362 Trillion (text mentions KRW 1.36 Trillion; +5% upward revision).
- 2026E Package Solutions Operating Profit: KRW 301.5 Billion (+42% upward revision).
- 2026E Net Profit: KRW 1.039 Trillion
- 2027E Earnings Forecast:
- Revenue: KRW 13.570 Trillion / Operating Profit: KRW 1.682 Trillion / Net Profit: KRW 1.307 Trillion
- Key Financial Multiples (2026E):
- EPS: KRW 13,394 (KRW 16,847 in 2027E)
- P/E: 20.3x / P/B: 2.0x
- ROE: 10.4% / EV/EBITDA: 8.1x
- BPS: KRW 134,470 / Dividend Yield: 1.2%
🚀 2. [Market Opportunities & Business Outlook]
- Emergence of MLCC LTA (Long-Term Agreement) Demand:
- Despite rising BoM burdens, select set makers are actively requesting MLCC LTAs; following Murata’s comments in December, Samsung Electro-Mechanics is identified as receiving similar requests.
- The fact that a leading North American customer renowned for premier SCM capabilities is initiating this request symbolically proves that set OEMs recognize potential future supply risks in passive components.
- MLCC Supply Dynamics & Pricing Power:
- AI server MLCC market is duopolized by Samsung Electro-Mechanics and Murata; suppliers are refraining from aggressive greenfield expansions, instead converting legacy IT lines.
- Server MLCC production lead times are more than 2x longer than IT lines, triggering effective capacity reductions (Capa Loss) as product mix shifts toward servers.
- While broad price increases on legacy contracts remain limited, favorable market conditions are forming to hike prices on new server and automotive MLCC lineups.
- FC-BGA Utilization & Capacity Expansion:
- While full 100% capacity utilization was originally expected in 2027, management commentary at CES pulled forward the timeline to 2H26, confirming accelerating demand visibility.
- Secured new projects from major U.S. Big Tech clients, driving the server/network share of FC-BGA revenue from 47% in 2025 to 57% in 2026 and 63% in 2027.
- In the substrate industry, capacity expansion discussions occur only after pre-allocating new lines to clients, making ongoing expansion discussions a strong indicator of multi-year demand visibility.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a conventional passive component maker vulnerable to short-term Chinese mobile demand pauses, but as a core hardware platform partner capturing cascading structural benefits as AI server bottlenecks migrate across hardware layers (GPU/CoWoS → memory/interconnect → passive components and package substrates). Rather than focusing on flat sequential 1Q26 MLCC shipment guidance, the analytical thesis places greater strategic significance on tier-1 set makers (including premier North American clients) requesting MLCC LTAs, effective capacity contraction driving pricing power on new server lineups, and major U.S. Big Tech project wins pulling forward FC-BGA full capacity to 2H26.
To assess whether this investment thesis continues to materialize, key tracking points include the formal execution of MLCC LTAs with major set OEMs, realized price increases across new server/automotive MLCC product lines, official regulatory filings regarding FC-BGA capacity expansions backed by U.S. Big Tech contracts, and achieving the projected 2026 annual operating profit (KRW 1.36 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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Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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