Silicon capacitor business draws attention as new growth driver; MLCC price hike possible; analysts cite big-tech customer base for further upside
The investment community 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 engine, driven by the parallel growth of AI server substrates and multilayer ceramic capacitors (MLCC) and the profitability outlook for the company's new silicon capacitor business.
Samsung Electro-Mechanics has emerged as the stock the investment industry views as the biggest beneficiary of the AI paradigm shift, brokerage analysts said Wednesday.
The company is expected to make its additional flip-chip ball grid array (FC-BGA) investment and scale visible in July. Analysts project that FC-BGA sales for AI servers and data centers will expand enough to push the utilization rate to 100 percent by year-end.
"Reflecting the high demand for additional production from next year onward, a decision on additional investment — to come online in 2028 — will be needed within the third quarter of this year," said Park Kang-ho, an analyst at Daeshin Securities. "Samsung Electro-Mechanics will proceed with stable investment backed by internal funds and big-tech customer support, compared with its original plan," he added.
Park also said orders for silicon capacitors carry significant meaning as a new growth factor for Samsung Electro-Mechanics.
"The existing portfolio involves businesses that require production capacity, but silicon capacitors operate on a fabless model — with no factory — which means a lower investment burden and higher estimated profitability compared with other products," Park said. "This becomes an additional factor in the valuation re-rating of Samsung Electro-Mechanics."
The possibility of MLCC price increases is another positive factor. Demand from the IT and automotive sectors is rising, and supply shortages in the AI segment are sustaining demand growth. Analysts expect MLCC prices in the AI segment to rise as a result.
Brokerage analysts say Samsung Electro-Mechanics' share price has ample room for further gains given the AI sector's momentum. "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 include global big-tech companies, the company can be seen as having secured additional growth drivers from next year onward," Park said. "Further valuation re-rating will follow."
Daeshin Securities maintained its buy rating on Samsung Electro-Mechanics on Wednesday and raised its target price to 2.4 million won from 920,000 won (about $606). Hyundai Motor Securities also issued a buy recommendation on the stock Wednesday, setting a target price of 2.3 million won.
iM Securities raised its target price to 2.3 million won from 1.8 million won on Tuesday. 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 that a stronger MLCC price-hike cycle ahead is likely.
Samsung Electro-Mechanics has also been climbing the Kospi market capitalization rankings on the back of a recent sharp share price surge. 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 — ahead of Hyundai Motor. It trails only Samsung Electronics, SK Hynix and SK Square, and continues to compete with Hyundai Motor for the fourth spot.
th5@heraldcorp.com
