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The securities industry is increasingly focused on the prospect of a valuation re-rating for Samsung Electro-Mechanics. Expectations are growing that expanding AI investment by global big tech companies will serve as a medium- to long-term growth driver, as the company's AI server substrate and multilayer ceramic capacitor (MLCC) businesses grow in tandem and its new silicon capacitor venture draws attention for its profitability.
Park Kang-ho, an analyst at Daeshin Securities, said in a report Wednesday that Samsung Electro-Mechanics is "the biggest beneficiary of the AI paradigm shift" and that "a valuation re-rating expansion is underway."
Park added that Samsung Electro-Mechanics is expected to announce additional investment in flip-chip ball grid array (FC-BGA) substrates and clarify the scale of that investment in July. "As FC-BGA sales for AI servers and data centers expand, the utilization rate will reach full capacity — 100 percent — by the end of this year," he said.
He also said that given strong demand for additional production capacity beyond next year, a decision on further investment — to come online in 2028 — would need to be made within the third quarter of this year. "Samsung Electro-Mechanics will proceed with stable investment through internal funds and customer support from big tech companies, relative to its original plan," he said.
Park further said that silicon capacitor orders carry significant weight as a new growth factor for Samsung Electro-Mechanics. "The existing portfolio consists of businesses that require production capacity, but silicon capacitors operate on a fabless model — with no factory — which means a lower investment burden and, by our estimates, higher profitability than other products," he said, adding that this represents an additional driver of the company's valuation re-rating.
Park also said the likelihood of MLCC price increases is high. "Samsung Electro-Mechanics is estimated to hold a higher market share than Japan's Murata in areas such as AI servers and Google's tensor processing units," he said. "With supply and demand balanced for IT and automotive applications, supply shortages in the industrial segment — particularly in AI — are sustaining demand growth, pushing the overall utilization rate above 95 percent."
He added that with investment expanding in FC-BGA and silicon capacitors, and factoring in rising order volumes, MLCC price increases in the AI segment are expected.
"Most of the issues that have recently come to the fore for Samsung Electro-Mechanics are in the AI space, and considering that its customers are global big tech companies, the company can be seen as having secured additional growth drivers beyond next year," Park said. "A further valuation re-rating expansion will follow."
Park maintained a buy rating on the stock and raised his target price to 2.4 million won from 920,000 won (approximately $606). Samsung Electro-Mechanics closed at 1.97 million won on Tuesday.
Also on Wednesday, Kim Jong-bae, an analyst at Hyundai Motor Securities, said the synergy between MLCC and FC-BGA deserves close attention. "Samsung Electro-Mechanics is already at the top tier in FC-BGA, and we see potential for it to become an industry leader through Embedded PCB or Glass Core Substrate going forward," he said.
Kim maintained a buy rating on Samsung Electro-Mechanics and kept his target price at 2.3 million won.
iM Securities also raised its target price on Tuesday, lifting it to 2.3 million won from 1.8 million won. The brokerage revised up its operating profit estimates for Samsung Electro-Mechanics to 3.3 trillion won in 2027 and 4.3 trillion won in 2028, increases of 5 percent and 6 percent, respectively, from its previous forecasts.
Meritz Securities recently raised its target price for Samsung Electro-Mechanics to 2.1 million won, saying "MLCC is emerging as a strategic asset in the AI era, and the likelihood of a stronger MLCC price-increase cycle ahead is high."
Samsung Electro-Mechanics has also been climbing the Kospi market capitalization rankings on the back of a recent sharp rally in its share price. As of 9 a.m. Wednesday, the company's market cap stood at 159.35 trillion won, placing it fourth among Kospi-listed companies by market cap, excluding preferred shares — surpassing Hyundai Motor and trailing only Samsung Electronics, SK Hynix and SK Square. The company and Hyundai Motor continue to compete for the fourth spot.
th5@heraldcorp.com
