"Samwha Capacitor Expected to Raise Prices on Trickle-Down Effect...Target Price Up"[Click eStock]

iM Securities Raises Samwha Capacitor Target Price to 127,000 Won

On August 24, iM Securities announced that it expects a price increase for Samwha Capacitor's flagship products due to a surge in demand for multilayer ceramic capacitors (MLCCs) used in artificial intelligence (AI) servers. The company raised its target price for Samwha Capacitor from 51,000 won to 127,000 won and maintained its 'Buy' investment rating.

In the second quarter, Samwha Capacitor reported revenue of 82.9 billion won (up 5.2% compared to the same period last year) and operating profit of 8.6 billion won (up 55.1%), showing a significant improvement in performance. By product segment, MLCC sales reached 43.5 billion won (up 20.5%), while DC-link capacitor sales totaled 16.9 billion won (up 14.2%). The operating margin recovered to double digits for the first time in eight quarters, standing at 10.4% (up 3.4 percentage points).

Lee Sangheon, an analyst at iM Securities, commented, "Profitability has improved as a result of a shift toward higher value-added products, leading to a better product mix and higher average selling prices (ASP), and as the leverage effect from increased utilization has begun to take effect."

iM Securities also forecasted that as demand for AI server MLCCs rises and leading companies expand price hikes across all specifications, Samwha Capacitor is likewise expected to benefit from a trickle-down effect, paving the way for its own price increases. Recently, companies like Samsung Electro-Mechanics and Murata have been reducing their output of low-margin, general-purpose MLCCs and ramping up production of high-margin MLCCs for AI servers and automotive applications. As a result, distributors' inventories of certain general-purpose MLCCs have sharply declined, leading to supply and demand gaps.

Lee further noted, "In this environment, the range of price increases is broadening. Samsung Electro-Mechanics, whose price hikes were limited to high-capacity models through June, has expanded the increases to all specifications since July, and this trend has continued in August. Similarly, Yageo switched to price increases across all specifications in July and August."

Furthermore, iM Securities pointed out that in April 2024, Samwha Capacitor was selected as the supplier of DC-link capacitors for Hyundai Motor Group's next-generation electric vehicle-exclusive eM platform. This is also expected to improve profitability by boosting revenue.

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