[Edaily Reporter Kim Kyung-eun ] On the 18th, KB Securities maintained its “Buy” rating and target price of 3 million won for SamsungElectroMechanics(009150), stating that the company is expected to post its best-ever third-quarter earnings.

Lee Chang-min, an analyst at KB Securities, stated in a report released that day, “While the business environment is at an all-time high, the stock price remains undervalued.”

SamsungElectroMechanics’ third-quarter revenue this year is projected to reach 3.83 trillion won, a 33% increase year-over-year, while operating profit is expected to rise 154% to 660.1 billion won. The operating profit margin is estimated at 17.2%. Operating profit is expected to exceed market forecasts of 597 billion won by approximately 11%.

The firm particularly noted that earnings expectations are rising rapidly. Just three months ago, the market forecast for third-quarter operating profit was around 470 billion won, but earnings estimates are being sharply revised upward as demand for products for artificial intelligence (AI) servers has proven stronger than expected.

In particular, the firm projected that improved profitability would be driven by rising capacity utilization rates for multilayer ceramic capacitors (MLCCs) and flip-chip ball grid array (FCBGA) products, price increases, and an expanding share of high-value-added products. The MLCC operating profit margin is expected to rise from 11.7% in the first quarter of this year to 16.6% in the second quarter and 22.0% in the third quarter. The operating profit margin for packaging substrates is also expected to rise from 7.6% to 13.6% and then to 20.8% over the same period.

The annual earnings outlook was also revised upward. SamsungSecurities raised its operating profit estimate for SamsungElectroMechanics this year by 4.1%, from 2.029 trillion won to 2.111 trillion won, and raised next year’s operating profit estimate by 5.2%, from 3.981 trillion won to 4.189 trillion won. This year’s and next year’s operating profit forecasts exceed market expectations by 8.4% and 12.2%, respectively.

In contrast, the stock price is moving in the opposite direction of earnings trends. On the 17th, SamsungElectroMechanics closed at 1.33 million won, down approximately 41% from the all-time high of 2.254 million won recorded on June 19.

The analyst emphasized, “Fundamentals are actually becoming even stronger,” adding, “During the same period, three long-term MLCC supply contracts with U.S. Big Tech companies were announced, and as the severe supply shortage of packaging substrates is expected to persist, we anticipate the signing of long-term supply contracts with favorable terms, including advance payments and profitability protection clauses.”

He noted, “Key AI components such as MLCCs and FCBGAs are experiencing an unprecedented boom, and further improvements in market conditions are expected,” adding, “The oversold market caused by excessive psychological concerns is creating a disconnect between the stock price and earnings.” He continued, “SamsungElectroMechanics, which is benefiting most strongly from AI trends within the electrical and electronics sector, is expected to follow an upward trajectory in the future,” adding, “The current moment presents a buying opportunity at a low price.”