[Edaily Reporter Hyera Lee ] On the 19th, KB Securities stated regarding SamsungElectroMechanics(009150), “The multilayer ceramic capacitor (MLCC) and packaging substrate sectors are expected to enter a period of exceptional prosperity,” maintaining its “Buy” investment rating and raising the target price by 36% from the previous level to 3 million won. It also maintained its designation of the stock as its top pick within the IT components sector.

Kim Yeon-soo, an analyst at KB Securities, stated in a report released today, “The market continues to underestimate the improvement in the MLCC and packaging substrate sectors, and there is a high likelihood of further upward revisions to earnings estimates and consensus forecasts.”
He analyzed that while the expansion of artificial intelligence (AI) servers, along with advancements in graphics processing unit (GPU) architecture and the move toward higher-specification application-specific integrated circuits (ASICs), is rapidly driving up demand for MLCCs and packaging substrates, supply is failing to keep pace. Researcher Kim explained, “The number of companies capable of producing high-capacity MLCCs and large-area packaging substrates for AI servers is limited, and yields are low, so the pace of supply expansion is slow.”
The outlook is that the supply shortage will persist for at least two years, and selling prices will continue to rise due to the supply-demand imbalance.

The report also cited potential benefits from the prolonged conflict between China and Japan as a factor to watch. Since last January, China has been imposing export controls on rare earths targeting Japanese companies. As a result, China’s rare earth exports to Japan in March and April fell by 88% and 82%, respectively, compared to the same months last year.
Analyst Kim noted, “While Japan’s rare earth inventory is estimated to last more than six months, demand for high-reliability MLCCs—which use rare earth elements such as yttrium and dysprosium—is growing rapidly, which could lead to increased supply uncertainty in the future.” He added, “If production disruptions at Japanese companies materialize, SamsungElectroMechanics is highly likely to benefit relatively as MLCC prices rise.”
KB Securities raised its estimate for SamsungElectroMechanics’ five-year compound annual growth rate (CAGR) in operating profit from 68% to 73%.
Analyst Kim stated, “SamsungElectroMechanics’ earnings and industry outlook remain undervalued,” adding, “Based on yesterday’s closing price, the stock has upside potential of 36.4%.”