Samsung Electro-Mechanics (009150.KS), which hit its daily upper limit on the 31st of last month, surged again on the following trading day. Amid weakness among top market-cap stocks, buying is being drawn in by a structural supply shortage of multilayer ceramic capacitors (MLCC).
According to the Korea Exchange on the 3rd, Samsung Electro-Mechanics shares traded at 1,177,000 won, up 35,000 won (3.06%) from the previous trading day. The stock reached 1.26 million won during the session before giving back some of its gains.
On the 31st, Samsung Electro-Mechanics traded at 1,142,000 won, up 29.92% (the daily upper limit) from the previous trading day. The gain came as second-quarter earnings exceeded market expectations, prompting inflows of bottom-fishing buying. Samsung Electro-Mechanics posted second-quarter revenue of 3.4572 trillion won and operating profit of 440.4 billion won, up 24.2% and 106.7% from a year earlier, respectively.
Increased shipments of high value-added MLCC for artificial intelligence (AI) servers and data centers, along with price increases and improved utilization rates for server-use flip-chip ball grid arrays (FC-BGA), drove earnings growth. As demand for AI server MLCC surges and major players maintain high utilization rates, expectations for supply shortages and further price increases are also growing.
"Supplier-favored market conditions are strengthening further," said Kim Min-kyung, an analyst at Hana Securities. "A surge in demand for AI server MLCC is expected to lift the profitability of the components division above past peaks." Hana Securities maintained its target price of 3 million won and a buy rating on Samsung Electro-Mechanics.
However, some in the securities industry have recently lowered their target prices for Samsung Electro-Mechanics. This is due to concerns over the durability of the economic cycle and a downward revision of multiples (valuations) across the AI supply chain. Recently, concerns about a peak-out in AI and semiconductors have emerged in the stock market, lowering the appropriate valuation multiples across the global AI value chain.
"At current prices, the stock trades at a price-to-earnings ratio (PER) of 20 times and 14 times based on 2027 and 2028 earnings, respectively, returning to the 10-year average of 19 times," said Park Jung-ha, an analyst at iM Securities. "Considering the improvement in the business fundamentals centered on server-use products, the recent share price decline is excessive." Still, iM Securities cut its target price for Samsung Electro-Mechanics by 33% to 2 million won from 3 million won.
