Brokerage : Shinhan Securities
Analyst : Kang-ho Oh, Analyst: Ji-beom Seo
Investment Rating : BUY (Maintained)
Target Price : KRW 190,000 (Lowered by -10%)
Core Momentum : Sustaining a >20% YoY operating profit growth trajectory into 2025 past target multiple adjustments reflecting Component growth pacing, propelled by product mix enhancements in AI-oriented MLCCs and expanding high-layer server/AI FCBGA shipments.
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY (Maintained) / KRW 190,000 (Lowered by 10% from previous target, applying a target P/B of 1.8x—changed to the past 3-year historical average—to 2024F BPS of KRW 106,575, with target multiples subject to future adjustments based on Component division growth speed)
- Current Share Price (As of Oct 29, 2024): KRW 120,200 (Upside potential: 58.1%)
- Market Capitalization: KRW 8.98T
- Key Financial Metrics & Forecast:
- Revenue: 2023A KRW 8.91T → 2024F KRW 10.20T → 2025F KRW 11.00T → 2026F KRW 12.20T
- Operating Profit: 2023A KRW 639.4B → 2024F KRW 775.3B (OPM 7.6%) → 2025F KRW 930.8B (OPM 8.5%, +20.1% YoY) → 2026F KRW 1.17T (OPM 9.6%)
- Net Profit (Controlling): 2023A KRW 423.0B → 2024F KRW 579.7B → 2025F KRW 687.3B → 2026F KRW 872.9B
- PER: 2023A 28.3x → 2024F 16.2x → 2025F 13.7x → 2026F 10.8x
- PBR: 2023A 1.5x → 2024F 1.1x → 2025F 1.1x → 2026F 1.0x
- ROE: 2023A 5.5% → 2024F 7.2% → 2025F 8.1% → 2026F 9.5%
- Dividend Yield (DY): 2023A 0.8% → 2024F 1.2% → 2025F 1.8% → 2026F 1.8%
- 3Q24 Earnings Review: Consolidated Revenue of KRW 2.6153T (+10.8% YoY, +1.4% QoQ), Operating Profit of KRW 224.9B (+22.2% YoY, +8.1% QoQ, OPM 8.6%). Operating profit matched Shinhan’s estimate while slightly missing consensus (KRW 236.2B, -4.8%). Optics (+7%) and Package Solutions (+9%) beat Shinhan’s revenue estimates, offsetting Component division softness (-6%).
- 4Q24 Earnings Forecast: Projected Revenue of KRW 2.3777T (+3.1% YoY, -9.1% QoQ), Operating Profit of KRW 162.0B (+46.7% YoY, -28.0% QoQ, OPM 6.8%). While seasonal component destocking and soft smartphone/PC demand are anticipated, sales of automotive and high-value products are expected to expand continuously.
🚀 2. [Market Opportunities & Business Outlook]
- Component Division (MLCC): 3Q24 revenue grew +9% YoY, driven by passive electronic components and industrial MLCCs. Although fab utilization slightly lagged previous assumptions (90%–95%) due to FX and IT softness, expanding sales of high-value products (P) driven by AI proliferation continues to enhance the product mix. Industrial MLCC revenue mix is forecast to remain around 18% in 2024.
- Package Solution Division: 3Q24 revenue jumped +27% YoY, driven by high-value multi-layer AI and server substrates. High-value FCBGA demand for server and AI applications is forecast to sustain solid growth despite 4Q seasonal smartphone/PC headwinds.
- Optics & Communication (Module): 3Q24 revenue recorded KRW 860.1B, exceeding Shinhan’s estimate by +7%.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics through the lens of a target price reduction (lowered by 10% to KRW 190,000) driven by adjusting the target P/B multiple to the past 3-year historical average (1.8x) to reflect Component division growth pacing amid delayed IT demand recovery, while highlighting that the mid-to-long term structural growth trajectory remains firmly intact. The central investment thesis emphasizes that despite this valuation multiple change, high-value product mix enrichment—powered by AI-driven high-end MLCCs and multi-layer server/AI FCBGA substrates—will deliver sustained >20% YoY operating profit growth into 2025 (KRW 930.8B).
To evaluate whether this investment thesis progresses according to expectations, key tracking points include the magnitude of 4Q year-end inventory destocking, the attainment of the full-year 2025 operating profit forecast (KRW 930.8B, +20.1% YoY), blended pricing (P) and mix expansion in the Component division along with recovery in its growth velocity, industrial MLCCs securing an ~18% share, and sustained demand growth for multi-layer server/AI FCBGA substrates. These developments can be monitored through upcoming quarterly financial announcements, official company IR presentations, and regulatory filings.
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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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