Samsung Electro-Mechanics: Valuation Discrepancy Behind Performance Growth

This is an analysis of Samsung Electro-Mechanics (009150). Recently, expectations for performance growth are high due to reports of a 1.6 trillion won Si Cap order and a forecast of 3 trillion won operating profit in 2027.

Performance Growth is a Fact

Si Cap orders and MLCC/substrate shortages are clearly acting as strong momentum. The upward adjustment of Earnings Per Share (EPS) is a fact, and I agree with it. This performance growth is positively impacting Samsung Electro-Mechanics’ stock price.

Irrationality of Valuation

However, there are regrettable aspects in the process of calculating the fair stock price. Applying Ibiden’s PER of 51.5x directly to Samsung Electro-Mechanics is deemed unreasonable. Samsung Electro-Mechanics is a large-cap stock with a market capitalization three times larger than Ibiden. Raising the target price to 1.7 million won by applying the multiple of a small-cap stock to a large-cap stock feels like ‘forcing a fit’. This discrepancy is more clearly visible in the valuation comparison table.

Already Reflected in Stock Price, Consider Profit-Taking

I believe that the current stock price has largely reflected these growth expectations. The trend is still alive, but I judge that it is now a period to consider ‘partial profit-taking’. The stock chart confirms a sharp rise in a short period.

In conclusion, while Samsung Electro-Mechanics’ performance growth is clear, it is time to take a critical view of its excessively assigned valuation.