MRAAY - Samsung Electro-Mechanics: Taiwanese Peers Provide A Good Leading Indicator
Investment highlights
For Samsung Electro-Mechanics (SMSGF), we maintain BUY and keep our six-month-forward target price at KRW145,000, applying 2.0x P/B to 2019F BPS. We expect 1Q19 sales to miss our previous estimate by 2.3% to come in at KRW2.12tn due to slow substrate sales. In addition, a 30% QoQ decline in the price of commodity multi-layer ceramic capacitors (MLCCs) should lead to an operating profit of KRW195.3bn, 17.5% below our forecast. Despite higher MLCC shipments, we estimate 2Q19 sales will slide 3.5% QoQ to KRW2.05tn because of weak module sales, but operating profit is forecast