Brokerage : Kyobo Securities
Analyst : Bo-young Choi
Investment Rating : Buy (Maintained)
Target Price : KRW 170,000 (Lowered)
Core Momentum : Qualitative fundamental improvement through expanding Non-IT exposure (automotive, industrial, AI) across all divisions, paving the way for a sharp earnings turnaround upon IT demand recovery under constrained industry supply.
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Buy (Maintained) / KRW 170,000 (Lowered, reflecting delayed IT demand recovery and near-term earnings sluggishness)
- Current Share Price (As of Oct 29, 2024): KRW 120,200
- Market Capitalization: KRW 9.15T
- Key Financial Metrics & Forecast:
- Revenue: 2023A KRW 8.91T → 2024.12E KRW 10.17T (+14.1% YoY) → 2025.12E KRW 10.96T (+7.8% YoY) → 2026.12E KRW 11.95T (+9.1% YoY)
- Operating Profit: 2023A KRW 639.0B → 2024.12E KRW 778.0B (OPM 7.7%) → 2025.12E KRW 923.0B (OPM 8.4%) → 2026.12E KRW 1.05T (OPM 8.8%)
- Net Profit: 2023A KRW 450.0B → 2024.12E KRW 600.0B → 2025.12E KRW 707.0B → 2026.12E KRW 799.0B
- EPS: 2023A KRW 5,617 → 2024.12E KRW 7,492 (+33.4% YoY) → 2025.12E KRW 8,840 (+18.0% YoY) → 2026.12E KRW 9,994 (+13.0% YoY)
- PER: 2023A 27.3x → 2024.12E 16.0x → 2025.12E 13.6x → 2026.12E 12.0x
- PBR: 2023A 1.5x → 2024.12E 1.1x → 2025.12E 1.0x → 2026.12E 1.0x
- ROE: 2023A 5.5% → 2024.12E 7.0% → 2025.12E 7.7% → 2026.12E 8.1%
- 3Q24 Earnings Review: Consolidated Revenue of KRW 2.6153T (+10.8% YoY, +3.4% QoQ), Operating Profit of KRW 224.9B (+26.3% YoY, +16.2% QoQ, OPM 8.9%). Results broadly matched Kyobo estimates (Revenue KRW 2.6027T, Operating Profit KRW 221.7B) while slightly missing consensus (Revenue KRW 2.6636T, Operating Profit KRW 236.2B).
- 4Q24 Earnings Preview: Projected Revenue of KRW 2.3959T (+3.9% YoY, -8.4% QoQ), Operating Profit of KRW 165.7B (+50.2% YoY, -28.7% QoQ, OPM 6.9%). Traditional off-season headwinds and soft IT conditions make QoQ declines across divisions unavoidable, though YoY growth remains intact.
🚀 2. [Market Opportunities & Business Outlook]
- Component Division (MLCC): Maintained healthy operations with fab utilization at 85%, ASP up +4%, and inventory at ~4 weeks. Higher mix of industrial and automotive products positively drove blended ASP expansion.
- Package Solution Division: Continues revenue growth supported by shipments of high-value substrates for AI servers and automotive ADAS applications.
- Optics & Communication Solutions: Solidified position within key customer flagship models and expanded automotive supply, though impacted by sluggish smartphone shipments and slower EV sales.
- Business Transformation: Structural mix enhancement is underway as the contribution from Non-IT applications (automotive, industrial, AI) steadily increases across all divisions.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics through the lens of a lowered target price (reduced to KRW 170,000) reflecting near-term sluggishness and lack of immediate IT hardware recovery, while highlighting that underlying operational quality is steadily improving. The central thesis places greater emphasis on portfolio diversification—characterized by expanding Non-IT revenue across automotive, industrial, and AI domains—and the company’s positioning to capture an aggressive earnings turnaround once IT end-market demand recovers amidst tightly controlled industry supply.
To assess whether this investment thesis progresses according to expectations, key verification points include maintaining 85% MLCC utilization and ~4-week inventory levels past the 4Q off-season, sustained ASP expansion driven by industrial and automotive mix, ongoing revenue acceleration from AI server and ADAS substrates, and the magnitude of profit leverage when downstream IT demand rebounds. These factors can be monitored through upcoming quarterly financial announcements, official company IR presentations, and regulatory filings.
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