[Edaily Reporter Shin Ha-yeon ] On the 11th, Yuanta Securities Korea projected that SamsungElectroMechanics(009150)would see simultaneous increases in both prices and shipment volumes of multilayer ceramic capacitors (MLCCs), driven by growing demand for artificial intelligence (AI) servers. The firm also believes that proactive expansion of production capacity, based on long-term supply agreements (LTAs), will further boost growth potential. It maintained its “Buy” investment rating, a target price of 2.3 million won, and its designation as the top pick in the electrical and electronics sector.
Ko Seon-young, an analyst at Yuanta Securities Korea, stated, “The company’s MLCC price hike trend was first observed in the distribution channel,” adding, “In May, a 10% price increase centered on low-margin PC-oriented products was implemented for the channel, and in July, a price hike of up to 30% across all product lines for the channel was announced.” She further explained, “Both the magnitude of the increase and its scope have expanded.”
The price hikes are driven by growing demand for MLCCs used in AI servers. Analysts note that as production lines are rapidly shifted to server-grade MLCCs, production capacity for general-purpose products is being eroded, leading to a structural deepening of the supply shortage.
This trend is also evident among global manufacturers. The BB Ratio—the ratio of MLCC order value to shipment value—has risen to 1.47 for Murata, 1.72 for Taiyo Yuden, and 2.2 for Yageo. Analyst Ko assessed this, stating, “This collectively indicates that the supply-demand balance for server-grade products is becoming exceptionally tight.”
SamsungElectroMechanics is also in discussions to sign about 10 long-term agreements (LTAs) to meet the demand for ultra-high-voltage, high-capacity MLCCs used in high-performance AI servers. Yuanta Securities Korea expects that this will lead to continued profit leverage effects for MLCCs driven by additional orders and price increases in the future.
In the printed circuit board (PCB) business as well, investment in AI servers is expected to serve as a growth driver. The year-over-year growth rate of capital expenditures (CapEx) for the four major North American tech companies—Google, Amazon, Microsoft, and Meta—has expanded to 82.5% this year and is projected to increase by an additional 35.3% next year.
In response, SamsungElectroMechanics has decided to expand its total capital expenditures this year while securing a portion of the funds needed to increase related production capacity through advance payments from customers. According to page 2 of the report, the company plans to invest 1.8 trillion won this year to expand the flip-chip ball grid array (FC-BGA) production capacity at its Vietnamese manufacturing subsidiary, with the possibility of further increases also suggested. In the long term, investments of approximately 15 trillion won and 8 trillion won are planned for the Busan and Sejong facilities, respectively.
Researcher Ko stated, “From the customers’ perspective, the LTA is an expression of the company’s commitment to ensuring medium- to long-term supply stability, while from the supplier’s perspective, it serves as an opportunity to structurally improve production capacity utilization and enhance the predictability of profitability.” He added, “Proactive investment expansion facilitated by the safety net provided by the LTA will act as a structural mechanism to strengthen profit resilience against future cycle fluctuations.”
Earnings growth is also steep. SamsungElectroMechanics’ second-quarter revenue reached 3.4572 trillion won, a 24.2% increase year-over-year, exceeding market forecasts by 4.3%. Operating profit surged 106.8% to 440.4 billion won, surpassing market forecasts by 8.5%. The operating profit margin stood at 12.7%, up 5.1 percentage points from the same period last year.
By business division, component sales rose 28.8% to 1.6494 trillion won, while package sales increased 36.7% to 771.6 billion won. Revenue from the optical communications business also rose 10.3% to 1.0362 trillion won. In particular, Yuanta Securities Korea forecasts that the operating profit margin for the packaging business will rise from 5.9% last year to 16.1% this year and 20.3% next year.
Yuanta Securities Korea projected that SamsungElectroMechanics’ revenue for this year would reach 14.3543 trillion won, a 26.9% increase year-over-year, with operating profit rising 114.8% to 1.9618 trillion won. For next year, the firm forecasts revenue of 18.3795 trillion won and operating profit of 3.6732 trillion won, representing increases of 28.0% and 87.2%, respectively. The operating profit margin is also expected to rise from 13.7% this year to 20.0% next year.
Analyst Ko noted, “The profit leverage effect related to MLCCs—driven by expectations of additional capacitor orders and price hikes—remains valid,” adding, “Large-scale, advance-payment-based CapEx centered on printed circuit boards will further strengthen the growth cycle.” He continued, “The company’s operating environment remains top-tier within the major electrical and electronics sectors,” and maintained a “Buy” rating and its status as the sector’s top pick.
