[Edaily Reporter Shin Ha-yeon ] On the 8th, Yuanta Securities Korea projected that SamsungElectroMechanics(009150)will continue a robust growth cycle over the next three years, driven by expanding orders for multilayer ceramic capacitors (MLCCs) used in artificial intelligence (AI) servers and the expansion of semiconductor package substrate production capacity. The firm analyzed that, despite concerns over a weakening exchange rate, rising sales prices and an increased share of high-value-added products will drive earnings improvement. The firm maintained its “Buy” rating and target price of 2.3 million won, designating the stock as its top pick in the electrical and electronics sector.

Ko Seon-young, an analyst at Yuanta Securities Korea, stated, “While concerns about exchange rates persist across the industry as a whole, the impact on SamsungElectroMechanics is expected to be limited due to anticipated room for further growth in both price and volume, an aggressive foreign exchange hedging strategy, and conservative exchange rate guidance.”

SamsungElectroMechanics’ consolidated revenue for the third quarter of this year is projected to reach 3.7625 trillion won, a 30.2% increase year-over-year, while operating profit is expected to rise 162.5% to 683.2 billion won. Operating profit is expected to exceed the market consensus of 623 billion won by 9.7%. The operating profit margin is projected to reach 18.2%, up 9.2 percentage points year-over-year and 5.5 percentage points quarter-over-quarter.

In particular, the component division is expected to show a notable improvement in performance. Third-quarter revenue for the Component Solutions division is estimated to reach 1.9339 trillion won, a 40.0% increase year-over-year. Operating profit is projected to be 448.7 billion won, with an operating profit margin of 23.2%.

Analysts attribute this to a rapidly improving product mix driven by rising demand for high-value MLCCs, particularly for AI servers. Analyst Ko explained, “For components, amid a robust demand environment, a shift toward high-value products such as servers is enabling an average selling price (ASP) increase of about 10% compared to the previous quarter.”

The firm also projected that the trend of price increases would continue. SamsungElectroMechanics is currently negotiating price hikes not only with distribution channels but also with direct-sales customers. Analyst Ko stated, “Following discussions with distribution channels, price increase negotiations with direct-sales customers are underway, and we expect the full-scale arrival of the 2027 price increase cycle.”

Profitability in the Package Solutions division is also expected to improve rapidly, driven primarily by high-value-added products for servers. Third-quarter revenue for Package Solutions is projected to reach 965.4 billion won, a 62.7% increase year-over-year, while operating profit is expected to expand to 193.1 billion won. The operating profit margin is projected to be around 20.0%.
Analyst Ko predicted, “For packaging, ASPs will continue to rise based on price hikes and high server market share, and SamsungElectroMechanics’ FC-BGA margins are expected to approach 30%.” The assessment is that high demand for server semiconductor substrates, coupled with rising prices, will support medium- to long-term profitability improvements.

Large-scale capital expenditures for capacity expansion are also a factor raising expectations for future growth. On the 28th of last month, SamsungElectroMechanics announced new capital expenditures and the acquisition of tangible assets. The plan involves investing a total of 6.78 trillion won, including 4.27 trillion won in Sejong and 2.51 trillion won in Vietnam. Analysts assess that the company’s previously communicated plans to expand ABF substrate production have now been finalized.

Researcher Ko explained, “In the case of Vietnam, considering that only the facilities were disclosed as a subsidiary, the investment scale is similar to that of Sejong when land and infrastructure are included,” adding, “If Busan is also factored in, the ABF investment scale for 2026–2028 will approach 9 trillion to 10 trillion won.”

Analysts note that this investment is particularly significant because it is being carried out based on long-term supply agreements (LTAs) and advance payments from customers. Analyst Ko stated, “The largest-ever ABF capital investment, backed by LTAs and customer advance payments, is currently underway,” assessing that the growth outlook for the package substrate business is becoming increasingly clear.

A large-scale expansion of production capacity is also planned for MLCCs. Yuanta Securities Korea projected that SamsungElectroMechanics would invest approximately 4 trillion to 5 trillion won with the goal of increasing production capacity by more than 20% year-over-year. The firm cited the steady stream of MLCC orders for AI servers as a key factor supporting this expansion.

Starting with an order for silicon capacitors last May, SamsungElectroMechanics announced additional orders for MLCCs for AI servers in June, July, twice in September, and again on the 6th of this month. Analyst Ko emphasized, “In the case of components, the robustness of AI server demand is confirmed through these order announcements,” adding, “The order value to be reflected in 2027–2028 alone is around 4 trillion won.”

Earnings forecasts have also been revised upward. Yuanta Securities Korea projects SamsungElectroMechanics’ consolidated revenue for this year to reach 14.4679 trillion won, a 27.9% increase year-over-year, and operating profit to rise 141.5% to 2.2057 trillion won. Compared to previous estimates, the operating profit forecast has been raised by 244 billion won.

The firm forecast that earnings growth will accelerate even further next year. In 2027, revenue is projected to reach 18.967 trillion won—a 31.1% increase from this year—while operating profit is expected to rise 121.6% to 4.8885 trillion won. The operating profit margin is also expected to rise from 15.2% this year to 25.8% next year. The operating profit forecast for next year was raised by approximately 1.215 trillion won from the previous estimate of 3.673 trillion won.

Analyst Ko predicted that, amid the effective profit leverage resulting from expanded MLCC orders and a price hike cycle, large-scale investments in the substrate business—backed by long-term supply contracts and advance payments—will reinforce the growth cycle through 2028.

The target price of 2.3 million won was calculated by applying a target price-to-earnings ratio (PER) of 45.2 times to the estimated earnings per share (EPS) of 49,784 won for 2027. The target PER is based on the average valuation of global semiconductor substrate manufacturers Ibiden and Unimicron. This represents a 43% upside potential compared to the closing price of 1,675,000 won on the 6th.

Analyst Ko emphasized, “The profit leverage effect related to MLCCs—including order intake and price hike cycles—remains valid,” adding, “For printed circuit boards, the largest-ever capital expenditure program, set to unfold through 2028 and supported by long-term supply contracts and advance payments, will further strengthen the growth cycle.” He continued, “The environment surrounding SamsungElectroMechanics remains among the best in the major electrical and electronics sectors,” and maintained a “Buy” investment rating and his status as the sector’s top pick.