Brokerage : Mirae Asset Securities
Analyst : Jun-seo Park
Investment Rating : BUY (Maintained)
Target Price : KRW 400,000 (Raised)
Core Momentum : Earnings upward revisions and multiple expansion projected on the back of FC-BGA entering a structural seller’s market, reaching full capacity utilization and ASP hikes in 2H26, alongside tight MLCC supply
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained; Target Price raised by 11% to KRW 400,000 (from KRW 360,000; Upside: 47.1% vs. current price of KRW 272,000).
- Target Price Revision Rationale:
- Raised Substrate division target EV/EBITDA multiple to 16.2x (from 13.5x), reflecting global substrate peer re-rating.
- Revised up 2026F Substrate division EBITDA forecast by +15% to reflect full capacity utilization and ASP increases in 2H26.
- 4Q25 Earnings Review:
- Revenue: KRW 2.9 Trillion (+17% YoY).
- Operating Profit: KRW 239.5 Billion (+108% YoY; beating consensus by +5%).
- Key Drivers: Margin expansion in FC-BGA served as the primary profit driver, accompanied by solid shipments and new module effects in the Optics division.
- 1Q26 Earnings Forecast:
- Revenue: KRW 3.0 Trillion (+11% YoY).
- Operating Profit: KRW 289.4 Billion (+44% YoY; revised up by +9%).
- Annual Financial Projections (2026F – 2027F):
- 2026F: Revenue KRW 12.762 Trillion / Operating Profit KRW 1.358 Trillion (OPM 10.6%) / Net Profit KRW 1.100 Trillion
- 2027F: Revenue KRW 14.304 Trillion / Operating Profit KRW 1.782 Trillion (OPM 12.5%) / Net Profit KRW 1.432 Trillion
- Key Financial Indicators (2026F):
- EPS: KRW 14,172
- P/E: 19.2x / P/B: 2.2x
- ROE: 11.2%
- Dividend Yield: 1.2%
🚀 2. [Market Opportunities & Business Outlook]
- Package Substrate Division (Transition to Seller’s Market):
- As major manufacturers experience rising utilization, the market is projected to enter a structural seller’s market upcycle starting in 2026.
- Preemptive customer actions observed across global accounts, including paying reservation deposits and accepting raw material cost pass-throughs.
- Pricing power is expected to remain exceptionally robust as alternative suppliers for high-spec packaging substrates are strictly limited.
- In automotive FC-BGA, preemptive inventory building amid raw material inflation and structural volume (Q) growth driven by ADAS sophistication are exacerbating supply tightness.
- Component Division (MLCC):
- Major global vendors operating at high capacity utilization, with select long-term supply agreements emerging, increasing the likelihood of sustained price hikes.
- CapEx & Future Upside:
- High utilization necessitates synchronized capacity additions across both MLCC and FC-BGA divisions; expanding CapEx should be recognized as a catalyst for further upside in 2027 rather than a cost burden.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not merely as a conventional component maker exposed to consumer IT off-seasons, but as a critical substrate and passive component partner commanding strong pricing power at customer negotiation tables amid AI-driven global shortages and second-half full capacity utilization. Rather than focusing on consumer set demand uncertainties, the analytical perspective places greater strategic significance on the FC-BGA division’s structural pivot into a seller’s market in 2026, client movements to secure volume via reservation deposits, and the ability to pass on upstream cost inflation into finished product prices.
To assess whether this investment thesis continues to materialize, key tracking points include achieving the raised 1Q26 operating profit forecast (KRW 289.4 Billion), verifying full capacity utilization and realized ASP gains in FC-BGA during 2H26, and potential formal announcements of synchronized CapEx expansions for both MLCC and FC-BGA to achieve projected 2026 annual operating profit (KRW 1.35 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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