Kiwoom Securities stated that Samsung Electro-Mechanics is expected to be the biggest beneficiary of the expanding artificial intelligence (AI) infrastructure investments, as it simultaneously operates multilayer ceramic capacitors (MLCC) and flip-chip ball grid arrays (FC-BGA). The firm maintained a 'buy' rating and a target price of 2.8 million won.
Kwon Min-kyu, a researcher at Kiwoom Securities, noted, "The announcement of FC-BGA capacity expansion confirms volume acquisition and revenue growth through 2032, and the recent long-term supply agreement (LTA) for AI and server-oriented MLCC enhances long-term growth visibility." He added, "The upward revision of earnings estimates for the third quarter of this year and for 2027-2028, despite a decline in exchange rates, indicates that a supplier-dominant market continues to prevail."
Samsung Electro-Mechanics is expected to invest approximately 9 trillion won to expand its FC-BGA production capacity. The announced expansion amounts to 4.27 trillion won for the Sejong plant and 2.51 trillion won for Vietnam, totaling 6.78 trillion won. Including additional expansions for the Vietnam infrastructure and the Busan factory, the total investment is projected to reach around 9 trillion won.
Once the expansion is completed, the production capacity for FC-BGA is expected to grow from 2.2 trillion won this year to over 6 trillion won by 2029, with shipment volumes estimated to nearly double. The significant impact on earnings is anticipated to be reflected starting in the third quarter of 2028. Kiwoom Securities highlighted that most of the expansion volume targets multiple hyperscalers and AI factory clients.
The firm also projected that Samsung Electro-Mechanics' performance would exceed market expectations. Kiwoom Securities forecasts the company's third-quarter revenue to reach 3.7754 trillion won, a 31% increase from the same period last year, with operating profit expected to rise 158% to 671 billion won. This operating profit estimate surpasses the market consensus of 626.6 billion won. Analysts believe that price increases due to supply shortages and a shift towards high-value products will enhance profitability, despite the decline in exchange rates.
In particular, the growing demand for AI servers is driving simultaneous price increases for both MLCC and FC-BGA. The current lead time for MLCC stands at 32 weeks, significantly exceeding the normal level of 12 weeks, while ABF substrates reach 48 to 56 weeks. Consequently, Kiwoom Securities has raised its 2027 operating profit forecast for MLCC by 22% and for FC-BGA by 9%.
Kwon stated, "As the price cycle intensifies, the profit estimates for Samsung Electro-Mechanics are rising the fastest. The company holds both MLCC and FC-BGA, which are the most benefited components from AI infrastructure investments, and this premium has yet to be fully reflected in the stock price."
* This article has been translated by AI.
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