Shinhan Investment Corp announced on July 2 that it has raised its target price for Samsung Electro-Mechanics from 2 million won to 3 million won, citing a confirmed entry into a structural growth phase driven by increased demand for high-value products in the artificial intelligence (AI) era. The firm maintained its "buy" rating and designated the stock as a top pick.
Analyst Oh Kang-ho stated, "The expansion of major product orders is strengthening growth capacity, and we are entering a phase where both performance and valuation are improving. In a market environment where AI demand exceeds supply, we view Samsung Electro-Mechanics as a key beneficiary."
He added, "Following the announcement of a 1.6 trillion won supply contract for silicon capacitors in May, the company has also revealed a supply contract for multi-layer ceramic capacitors (MLCC) worth approximately 450 billion won, further proving its product competitiveness. This is expected to represent a significant portion of projected revenues for 2027."
Oh noted that the increase in global demand for high-value MLCCs and the structural growth trend are differentiating from previous cycles. Despite concerns over IT demand, the company's operating rates have risen from 70% to over 90% in the past three years, confirming growth capacity through expanded orders until 2028.
He also mentioned, "The components and substrate businesses are gaining competitiveness as they record increased orders alongside the emergence of the AI market. Component profitability is expected to improve from 10% in 2024 to 27% in 2027, and we anticipate price and mix effects to rise in an environment with over 90% operating rates."
Furthermore, he stated, "Expectations for revenue growth due to the expansion of the product portfolio are spreading, and the increase in orders from global tech giants and the overall re-evaluation of valuations among peers are also positive developments."
* This article has been translated by AI.
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