Samsung Electro-Mechanics: Weighing Profit Growth Alongside the Burden of Capacity Expansion
Analysis date
Published
MW GOBLIN · AI company research
As of 2026-11-12, the view on profit growth from AI components is positive. However, the attractiveness of the current share price depends on further margin improvement in 2027. Given the large-scale investment and uncertainty in the estimates, it is too early to conclude that the shares are undervalued.
Toss Securities
Quote November 12, 2026 at 11:49 KST
Retrieved November 12, 2026 at 11:49 KST
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High-value-added products lifted margins
Expansion in high-value-added AI components has already translated into higher margins. In 2026 Q3, component revenue was 1883000000000 KRW, up 36% year over year, while package revenue was 939000000000 KRW, up 58%. The company attributed the growth to improvements in the MLCC and FC-BGA product mix. Optical revenue, however, fell 9% from the previous quarter. Profit growth can continue only if improvements in AI component pricing and product mix keep offsetting weaker IT demand. [1][5]
Cash spending precedes revenue from capacity expansion
Capacity expansion increases both growth potential and the cash burden. Subtracting net spending on tangible and intangible assets of 862700000000 KRW from Q3 operating cash flow of 1145200000000 KRW leaves 282500000000 KRW. At the end of September, cash and cash equivalents were 4113700000000 KRW, and borrowings were 3426300000000 KRW. According to the company, the 6780000000000 KRW investment in Sejong and Vietnam will begin making a substantial revenue contribution in 2028, so spending on capacity expansion may rise before profits do. [1][4][5]
Forward P/E of 18.6 x assumes rising margins
A share price of 934000 KRW implies a P/E of 18.6 x based on Shinhan's 2027 EPS estimate of 50,186 KRW. This estimate requires the operating margin to rise from 16.1% in 2026 to 25.2% in 2027. On November 11 day as well, EPS was maintained, but the target multiple was lowered. No independent price target is provided because the details of the EPS adjustments for preferred shares and treasury shares are unclear, and the basis for an appropriate multiple is insufficient. [2][3][4]
What could change the thesis
- Continued improvements in MLCC and FC-BGA pricing and product mix that bring the operating margin closer to the 2027 forecast of 25.2% would strengthen the positive view.
- If phased mass production in 2027 is delayed or increased investment persistently exceeds operating cash flow, the assessment of growth's contribution to shareholder value would be lowered.
Sources and Evidence
- Samsung Electro-Mechanics 2026 Q3 Results ↗2026-10-28 · Pages 3–10: Results, financial position, and cash flows
- Samsung Electro-Mechanics 2026 Semiannual Report ↗2026-08-14 · Total shares issued, consolidated financial statements, and contingent commitments
- Shinhan Securities, Samsung Electro-Mechanics: The Best Timing ↗2026-10-29 · Pages 1–2 and 5: Estimate revisions, EPS, and cash flows
- Shinhan Securities 2027 Industry Outlook: Electrical and Electronics ↗2026-11-11 · Pages 4, 23, and 25–26: Investment, valuation, and outlook
- The Elec: Full Transcript of Samsung Electro-Mechanics' Q3 Earnings Presentation ↗2026-10-28 · Management commentary, MLCC, and capacity expansion Q&A
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