"No Wonder It Soared Today... Morgan Stanley Eyes 3 Million Won Target—Which Stock Is It?"

Top Tech Pick Shifted From Samsung Electronics to Samsung Electro-Mechanics
MLCC Price Strength and ABF Demand Recovery Expected

Morgan Stanley has changed its top pick from Samsung Electronics to Samsung Electro-Mechanics. The investment bank regards now as an optimal buying opportunity for Samsung Electro-Mechanics, which soared as high as 2.4 million won on expectations of a boost from artificial intelligence (AI) investments, only to see its price recently fall by half to the 1.2 million won range. Morgan Stanley maintained its overweight rating on Samsung Electro-Mechanics and raised its target price from 2.56 million won to 2.62 million won.

Morgan Stanley. Yonhap News Agency

Focus on AI Component Demand... Strong MLCC Prices and ABF Demand Improvement Expected

According to the financial investment industry on August 13, Morgan Stanley switched its top pick to Samsung Electro-Mechanics, citing the likelihood of strong prices for multi-layer ceramic capacitors (MLCC) and improvement in demand for Ajinomoto Build-up Film (ABF) substrates. The bank also projected that margin and earnings per share (EPS) estimates for Samsung Electro-Mechanics would significantly surpass market consensus.

The main driver is increased investment in AI data centers. With hyperscalers maintaining consistently strong demand for components, customers not related to AI reportedly have begun to feel anxious about securing sufficient supplies.

As customers move to place advance orders, demand visibility is lengthening. Morgan Stanley expects this trend to support MLCC prices from the second half of this year through next year.

The company is also undergoing a transformation. The AI-related sales portion of Samsung Electro-Mechanics’ business is expected to expand from 20% in 2026 to 31% in 2027. As AI sales more than double, sales and profit growth are projected to become structurally stronger.

As the share of high-margin AI products grows, profit growth becomes sustainable, insulated from mere economic cycles, potentially leading to higher valuation multiples.

Growth potential for the ABF business was also highlighted. Samsung Electro-Mechanics has secured several orders for AI chip substrates from US ASIC (Application-Specific Integrated Circuit) companies and is also expanding operations at a new plant in Vietnam through 2028. Morgan Stanley suggested that ABF revenue could increase 4 to 5 times by 2030.

The increase in market share is attributed to higher technological complexity. New ASIC chips are rapidly increasing in size and number of layers, and multi-chiplet designs that bond several chips together are spreading. To enhance power stability, embedding MLCCs within ABF is becoming more common. The logic follows that the greater the complexity, the larger the market share Samsung Electro-Mechanics will achieve.

In addition, from 2028 a new product cycle for glass substrates may begin, and price cycles for silicon capacitors and ABF products are appearing stronger and faster than previously expected.

Stock Price Could Double Even Under Base Scenario

Morgan Stanley believes such prospects have not yet been adequately reflected in the current stock price. The projected 2028 price-to-earnings (P/E) ratio is 18x—well below the previous peak of 30x—even though the EPS growth rate is stronger. “There is still upside even under the most conservative bearish market scenario,” Morgan Stanley stated, “and under the base scenario, the stock price could double.”

The new target price of 2.62 million won reflects a 2028 forecast P/E of 33x. The target price under a bullish scenario remains at 3 million won, while the bearish scenario, reflecting increased volatility, was lowered to 1.35 million won.

Morgan Stanley’s Top Pick Selection Drives 15%+ Surge

On August 13, Samsung Electro-Mechanics traded strongly in the afternoon, buoyed by both Morgan Stanley’s top pick designation and the broader rally in semiconductor stocks. As of 2:00 p.m. that afternoon, shares were up 15.5% from the previous session, trading at 1,542,000 won.

At the same time, both Samsung Electronics and SK hynix were up between 5% and 7%, tracking gains in US-listed semiconductor stocks like Micron, after the US July Consumer Price Index (CPI) matched consensus expectations.

This content was produced with the assistance of AI translation services.