Brokerage : Yuanta Securities
Analyst : Seon-myung Ko
Investment Rating : BUY (Maintained)
Target Price : KRW 280,000 (Raised)
Core Momentum : Target price raised based on accelerating server mix expansion in FC-BGA substrates and anticipated server application growth in MLCCs driving earnings visibility into 2026.
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: BUY maintained; Target Price raised from KRW 260,000 to KRW 280,000 (21% upside potential), derived by applying a target P/B multiple of 2.3x (average P/B during the 2020–2021 component upcycle) to the 2026 BPS forecast.
- Base Share Price (As of Oct 29, 2025): KRW 232,000 (Market Cap: KRW 17.33 Trillion, Shares Outstanding: 77.60M, 60-Day Avg Turnover: KRW 99.0 Billion, Foreign Ownership: 38.61%, Dividend Yield: 1.45%).
- Valuation Multiples & Trend:
- PER: 2024: 15.6x → 2025(E): 26.4x → 2026(E): 18.0x
- PBR: 2024: 1.2x → 2025(E): 1.9x → 2026(E): 1.9x
- EV/EBITDA: 2024: 6.7x → 2025(E): 9.6x → 2026(E): 8.6x
- ROE: 2024: 8.2% → 2025(E): 7.4% → 2026(E): 10.6%
- Earnings Forecast Summary (Post-Revision):
- 2025(E): Revenue KRW 11.24 Trillion (+1.0% vs. prev.), Operating Profit KRW 895.0 Billion (+6.2% vs. prev., OPM 8.0%), Net Profit KRW 662.0 Billion, EPS KRW 8,629.
- 2026(E): Revenue KRW 12.35 Trillion (+1.5% vs. prev.), Operating Profit KRW 1.13 Trillion (+2.4% vs. prev., OPM 9.1%), Net Profit KRW 967.0 Billion, EPS KRW 12,607.
- 3Q25 Review & 4Q25 Preview:
- 3Q25 Results: Revenue of KRW 2.89 Trillion (+10.5% YoY, +3.7% QoQ) and Operating Profit of KRW 260.0 Billion (+15.7% YoY, +22.2% QoQ, OPM 9.0%), beating market consensus (Operating Profit of KRW 242.0 Billion).
- 4Q25 Outlook (Post-Revision): Projected Revenue of KRW 2.83 Trillion (+2.9% vs. prev.) and Operating Profit of KRW 221.0 Billion (+21.7% vs. prev., OPM 7.8%).
🚀 2. [Market Opportunities & Business Outlook]
- 3Q25 Divisional Performance Highlights:
- Component Division: Revenue reached KRW 1.38 Trillion (+15.4% YoY, +7.8% QoQ). Sustained high utilization in the upper 90% range with inventory levels held steady at ~4 weeks. Current demand remains centered on mobile and automotive (Asian EVs and ADAS).
- Package Solution Division: Revenue reached KRW 593.0 Billion (+6.3% YoY, +5.1% QoQ). Expanding presence in AI accelerators is confirming broader server influence; server-related revenues within FC-BGA are projected to exceed 50% in 2026 alongside AI and data center growth.
- Optics & Communication Division: Revenue reached KRW 915.0 Billion (+6.3% YoY, -2.6% QoQ), supported by automotive camera module growth and foldable smartphone launch effects.
- 4Q25 Outlook & Server Exposure Expansion in 2026:
- Q4 performance may see a temporary breather due to seasonal client inventory adjustments and external macro/FX uncertainties.
- Following the confirmed server transition in the Package division, the sequential expansion of server exposure into the MLCC division is expected to emerge as the primary growth driver for 2026.
📝 Editor’s Comment (Perspective)
The covering analyst views Samsung Electro-Mechanics as a company executing a sequential expansion in server exposure, transitioning from its server substrate base (FC-BGA) to the broader MLCC product portfolio. The perspective emphasizes that rather than focusing on the anticipated Q4 off-season pause from year-end destocking, market attention should center on the 2026 outlook where server substrates exceed half of FC-BGA revenues and upcoming MLCC server adoption enhances medium-to-long term growth visibility.
To verify whether this investment thesis materializes, key trackable checkpoints include: 1) achieving a server revenue share exceeding 50% within FC-BGA in 2026; 2) visible customer design wins and supply expansion of MLCCs into AI server applications beyond the current mobile and automotive base; and 3) reaching 2026 Operating Profit in the KRW 1.1 Trillion range (projected at KRW 1.13 Trillion). These developments can be monitored through upcoming quarterly earnings releases, official IR materials, regulatory filings, and corporate disclosures.
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