Meritz Securities analyzed on July 23 that Samsung Electro-Mechanics is poised for a significant shift towards a business-to-business (B2B) model, driven by increasing demand for artificial intelligence (AI). The firm maintained its target price at 3 million won and its investment rating at 'Buy.'
Yang Seung-soo, a researcher at Meritz Securities, stated, "Samsung Electro-Mechanics is rapidly transitioning from a consumer-focused parts manufacturer to an AI-centric B2B company. Just as memory semiconductors entered a new profit cycle after improving their B2B structure, Samsung Electro-Mechanics is also likely to enter a boom phase."
Meritz Securities forecasts that Samsung Electro-Mechanics will report second-quarter sales of 3.3535 trillion won, a 20.4% increase from the same period last year, and an operating profit of 428.2 billion won, up 101.0% year-on-year. This operating profit is expected to exceed market consensus by 5.9%.
Yang identified the expansion of AI-oriented MLCC (multi-layer ceramic capacitors) as a key growth driver. He noted that a recently signed supply contract for AI MLCCs, valued at approximately 450 billion won, surpasses the annual sales of its largest smartphone client.
He added, "We are currently in discussions for additional supply contracts with several cloud service providers and semiconductor manufacturers. Each contract signed will lead to a stepwise increase in demand."
Yang projected that by 2028, the revenue share from AI-oriented MLCCs will exceed that of traditional IT products, emphasizing that AI MLCCs have higher average selling prices (ASP) and profitability compared to general products. He stated, "This will not only enhance profitability but also drive market strength and price increases due to a reduction in the supply of general MLCCs."
Based on the anticipated increase in AI-oriented sales and rising prices of general products, he expects the operating profit margin of the components division to reach 32.0% by 2028, surpassing the previous peak of 31.5% in 2018.
He also explained that ABF substrates are rapidly transitioning from a PC-centric focus to an AI data center focus. With ongoing supply shortages and the impact of increased production capacity, he anticipates a significant contribution to overall performance growth starting in 2028.
* This article has been translated by AI.
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