Source: IBK Securities research report, “MLCC Price Increase: Do Not Underestimate It”
Original author: Woonho Kim, IT and Semiconductor Analyst at IBK Securities
Publication date: July 31, 2026
Company covered: Samsung Electro-Mechanics (Korea Exchange: 009150)
English adaptation: This article rewrites and explains the original Korean report in simple English for international investors. All earnings forecasts, valuations, and investment opinions attributed to IBK Securities are the firm’s estimates, not guaranteed results.
The Main Point
IBK Securities remains bullish on Samsung Electro-Mechanics.
The investment firm maintained its Buy rating and its price target of 1.75 million Korean won per share. At the time of the report, the stock traded at 879,000 won.
That price target suggested potential upside of approximately 99%.
The report’s main argument is that Samsung Electro-Mechanics is entering a long-term growth cycle driven by two important AI components:
- MLCCs, or multilayer ceramic capacitors
- Advanced semiconductor package substrates, especially FC-BGA
The company’s earnings are improving faster than previously expected. More importantly, the analyst believes the recent MLCC price increase is evidence of a serious supply shortage, not a temporary rise in demand.
In simple terms, IBK Securities believes Samsung Electro-Mechanics should no longer be viewed mainly as a smartphone component supplier. It may increasingly become an important supplier to the global AI infrastructure market.
What Does Samsung Electro-Mechanics Produce?
Samsung Electro-Mechanics is a South Korean electronic components manufacturer affiliated with the Samsung Group.
Its business is divided into three main areas.
1. Components
This division produces MLCCs.
An MLCC is a tiny electronic component that stores and controls electricity inside electronic devices. A single smartphone, car, server, or computer may require hundreds or thousands of these components.
Advanced AI servers require large numbers of high-performance MLCCs because they use powerful processors, memory chips, networking equipment, and power systems.
2. Package Solutions
This division produces semiconductor package substrates, including FC-BGA.
FC-BGA stands for Flip Chip Ball Grid Array. It is a high-end substrate that connects a large semiconductor chip to a computer board.
Advanced CPUs, GPUs, AI accelerators, and custom AI chips require larger and more complex package substrates. As chips become more powerful, their packages become thicker and wider and contain more electrical connections.
Only a limited number of companies can produce these advanced substrates at the required quality and scale.
3. Optical Solutions
This division mainly produces camera modules for smartphones and other devices.
The optical business remains important, but the report expects MLCCs and semiconductor packages to drive most of the company’s future profit growth.
Why AI Requires More Than Memory Chips
Investors often focus on GPUs and high-bandwidth memory when discussing AI infrastructure. However, an AI server contains many other critical components.
As the number and performance of AI chips increase:
- Packages become larger and more complicated.
- Power requirements increase.
- More MLCCs are needed to control electricity.
- High-end package substrates become more valuable.
- Component reliability becomes more important.
Samsung Electro-Mechanics produces both MLCCs and advanced package substrates.
IBK Securities argues that this combination is unusual. The report describes Samsung Electro-Mechanics as the only company with meaningful exposure to both product categories.
This gives the company two different ways to benefit from AI capital spending.
Why the MLCC Price Increase Matters
The report calls the MLCC price increase a major event.
MLCC manufacturers do not raise prices frequently. Large suppliers generally value long-term customer relationships and try to avoid sudden price increases.
Therefore, when a major manufacturer raises MLCC prices, it may mean that supply has become too tight for the company to absorb higher demand without changing prices.
According to IBK Securities, customers appear to have accepted the increase because the shortage is serious enough that they have limited alternatives.
The analyst believes the price increase could have several positive effects:
- Higher revenue per unit
- Better factory utilization
- A more profitable product mix
- Higher operating margins
- Greater earnings visibility
- Stronger long-term pricing power
The report also notes that Samsung Electro-Mechanics’ operating margin previously reached approximately 40% during an earlier period of strong MLCC pricing.
This does not mean margins will automatically return to 40%. However, it shows how strongly MLCC prices can affect the company’s profits.
Earnings Are Improving Faster Than Expected
Samsung Electro-Mechanics reported second-quarter 2026 revenue of approximately 3.46 trillion won, an increase of 7.7% from the first quarter.
Revenue growth was led by the package and component divisions.
Second-quarter changes by division were:
Business divisionRevenue change from Q1 2026
| Package Solutions | +6.4% |
| Components | +17.1% |
| Optical Solutions | -3.7% |
| Total company | +7.7% |
The company generated approximately 440.4 billion won in operating profit, an increase of 56.9% from the first quarter and 106.7% from the same period one year earlier.
The rise in operating profit was much faster than the rise in revenue. This means that profitability improved substantially.
IBK Securities attributed the margin improvement to:
- A favorable Korean won-U.S. dollar exchange rate
- Higher product prices
- Increased factory utilization
- A better product mix
- Stronger AI-related demand
The report also notes that the first quarter included one-time expenses. Therefore, part of the second-quarter increase reflects the absence of those costs.
Profitability by Business Division
IBK Securities estimated the following second-quarter operating margins:
Business divisionEstimated operating margin
| Package Solutions | 13.8% |
| Components | 17.7% |
| Optical Solutions | 4.0% |
| Total company | 12.7% |
The package and component businesses generated most of the improvement.
The optical division remained profitable, but its contribution was much smaller and its revenue declined from the previous quarter.
This supports the analyst’s view that Samsung Electro-Mechanics is becoming increasingly dependent on AI-related electronic components rather than smartphone camera modules.
The Third Quarter Could Set Another Record
IBK Securities expects Samsung Electro-Mechanics to report another record quarter in the third quarter of 2026.
The firm forecasts:
- Revenue of approximately 3.80 trillion won
- Operating profit of approximately 607.5 billion won
- Operating margin of approximately 16%
Revenue is expected to increase 9.9% from the second quarter, while operating profit is expected to increase 37.9%.
The report expects:
- Package revenue to increase approximately 20.3%
- FC-BGA sales volume to increase approximately 20%
- MLCC shipment volume and pricing to improve
- Optical revenue to decrease approximately 9.6%
The operating margins of the package and component divisions are both expected to rise above 20%.
Importantly, the analyst believes the current forecast does not yet fully reflect the MLCC price increase. This creates the possibility of additional earnings upgrades later in the quarter.
Annual Earnings Forecasts
IBK Securities provided the following financial estimates:
Financial measure20252026 estimate2027 estimate2028 estimate
| Revenue | 11.31 trillion won | 14.10 trillion won | 16.32 trillion won | 19.14 trillion won |
| Operating profit | 913 billion won | 1.96 trillion won | 3.01 trillion won | 4.87 trillion won |
| Net income attributable to shareholders | 706 billion won | 1.52 trillion won | 2.24 trillion won | 3.51 trillion won |
| Operating margin | 8.1% | 13.9% | 18.4% | 25.5% |
| EPS | 9,099 won | 19,579 won | 28,814 won | 45,240 won |
Under these estimates, 2026 operating profit would rise by approximately 114% from 2025.
The analyst then expects operating profit to increase by another 54% in 2027 and 62% in 2028.
This would represent a major transformation in profitability. The company’s operating margin would rise from 8.1% in 2025 to 25.5% in 2028.
The report even questions whether its forecast of nearly 5 trillion won in 2028 operating profit may be too conservative.
Earnings Estimates Were Raised
After reviewing the second-quarter results and the improving outlook, IBK Securities raised its forecasts.
For full-year 2026, the firm increased its estimates by:
- Revenue: approximately 2.6%
- Package operating profit: approximately 24%
- Component operating profit: approximately 7.9%
- Total operating profit: approximately 10.9%
The firm’s revised 2026 operating profit estimate rose from approximately 1.76 trillion won to 1.96 trillion won.
The size of the profit upgrade was much larger than the revenue upgrade. This indicates that IBK Securities expects better pricing and utilization to produce significant operating leverage.
Where the Long-Term Profit Growth May Come From
IBK Securities expects Samsung Electro-Mechanics’ operating profit to improve from its 2023 low through at least 2028.
The report identifies two main growth engines.
MLCCs for AI Servers
The proportion of high-value server MLCCs is expected to rise.
IBK Securities forecasts that the MLCC business could generate close to 3 trillion won in operating profit by 2028.
AI servers require large quantities of reliable, high-performance capacitors. These products generally have higher prices and better margins than ordinary consumer-electronics MLCCs.
Advanced Packages for Servers and AI ASICs
The package business is expected to benefit from increasing demand for:
- Server processors
- AI accelerators
- Custom AI chips
- AI ASICs
- Larger FC-BGA substrates
ASIC stands for application-specific integrated circuit. Unlike a general-purpose processor, an ASIC is designed for a particular task. Major technology and cloud companies increasingly use custom ASICs to run AI workloads more efficiently.
IBK Securities forecasts that the package division could generate approximately 1.7 trillion won in operating profit by 2028.
Why the Stock Price Fell
The report acknowledges that Samsung Electro-Mechanics shares declined sharply after IBK Securities raised its target price.
The analyst gives two main explanations:
- Weakness in the broader Korean stock market
- A correction from a previously high valuation
The stock had risen rapidly before the correction. According to the report, it had gained approximately 215% over six months and 479% over twelve months, even after the recent decline.
IBK Securities believes the correction was large enough and that investors should now focus on the company’s long-term earnings direction.
However, international investors should recognize that a stock can remain volatile even when earnings are improving, especially after such a large previous increase.
How IBK Securities Calculated the Price Target
IBK Securities used a sum-of-the-parts, or SOTP, valuation.
This method values each business division separately and then adds them together.
The firm compared:
- Samsung Electro-Mechanics’ package business with Japan’s Ibiden
- Its MLCC business with Japan’s Murata Manufacturing
The valuation used the following estimated EV/EBITDA multiples:
Business divisionApplied EV/EBITDA multiple
| Package Solutions | 42 times |
| Components | 40 times |
| Optical Solutions | 7 times |
After subtracting estimated net debt and adding the value of investment assets, IBK Securities calculated a fair value of approximately 1,753,410 won per share.
It rounded this figure to a price target of 1.75 million won.
Why the Valuation Requires Caution
Although the earnings growth forecast is strong, Samsung Electro-Mechanics was not inexpensive based on near-term earnings at the report’s reference price.
The report’s forecast valuation ratios were:
Valuation measure2026 estimate2027 estimate2028 estimate
| P/E ratio | 44.9 times | 30.5 times | 19.4 times |
| P/B ratio | 6.2 times | 5.2 times | 4.1 times |
| EV/EBITDA | 21.2 times | 13.7 times | 9.3 times |
A 2026 P/E ratio of almost 45 times is high for an electronic components manufacturer.
The price target also depends on EV/EBITDA multiples of 40 to 42 times for the package and component businesses. These are demanding valuation assumptions.
The bullish case therefore requires more than earnings growth. It requires investors to continue treating Samsung Electro-Mechanics as a high-quality AI infrastructure supplier deserving a premium valuation.
Capital Spending Will Rise Sharply
The report forecasts major investment in production capacity.
Estimated capital expenditures are:
- 2025: approximately 1.19 trillion won
- 2026: approximately 4.76 trillion won
- 2027: approximately 7 trillion won
- 2028: approximately 5 trillion won
These investments could support long-term growth, but they also create financial risk.
The company’s free cash flow may remain under pressure while it builds new capacity. IBK Securities expects net debt to rise and forecasts a large increase in borrowings in 2027.
If future demand does not grow as expected, the company could be left with expensive factories operating below capacity.
Dividend Income Is Very Small
IBK Securities assumes an annual dividend of approximately 2,350 won per share from 2025 through 2028.
At the report’s reference share price, the estimated dividend yield is only around 0.1%.
Therefore, this is not primarily a dividend investment. The investment thesis depends on earnings growth and share-price appreciation rather than cash income.
The Main Risks
The report is bullish, but international investors should consider several important risks.
1. The stock already carries a premium valuation
The company trades at a high near-term P/E ratio, and the price target uses high valuation multiples. If investor enthusiasm for AI suppliers weakens, the stock could decline even if earnings continue growing.
2. MLCC price increases may not continue
The bullish forecast assumes that strong demand and tight supply will support higher prices. Customers may eventually resist price increases or find alternative suppliers.
3. Competitors could increase production
Japanese and Taiwanese suppliers, including Murata and other component manufacturers, may expand capacity. Greater supply could reduce pricing power.
4. AI infrastructure spending could slow
If cloud companies reduce data-center capital spending, demand for AI servers, FC-BGA substrates, and server MLCCs could weaken.
5. Capital spending is very large
Samsung Electro-Mechanics plans to invest heavily in production capacity. Delays, cost overruns, or weaker-than-expected demand could reduce returns on those investments.
6. The optical business remains exposed to smartphones
The camera-module business is still affected by smartphone demand, competition, customer concentration, and price pressure.
7. Currency movements affect earnings
A weaker Korean won can improve the value of overseas revenue when translated into won. A stronger won could reduce this benefit.
8. Customer concentration may be significant
As a Samsung Group affiliate and a supplier to major technology companies, Samsung Electro-Mechanics may depend heavily on a relatively small number of large customers.
9. The price target is aggressive
The 1.75 million won target was approximately 99% above the reference price. Reaching it would require strong earnings growth and continued premium valuation multiples.
An Important Note About the Rating
IBK Securities disclosed the distribution of its research ratings for the period from July 1, 2025, through June 30, 2026:
- Buy: 95.3%
- Trading Buy: 4.0%
- Neutral: 0.7%
- Sell: 0%
This does not mean the Samsung Electro-Mechanics recommendation is incorrect. However, it shows why investors should examine the earnings assumptions and valuation method instead of relying only on the word “Buy.”
Final Takeaway for International Investors
IBK Securities believes Samsung Electro-Mechanics is entering a new stage of growth.
The bullish case is based on five major ideas:
- AI servers require increasing numbers of high-performance MLCCs.
- Advanced processors require larger and more complex FC-BGA substrates.
- Supply is tight enough to support an unusual MLCC price increase.
- Revenue and operating margins are improving faster than expected.
- Samsung Electro-Mechanics has exposure to both AI packages and MLCCs.
If these assumptions are correct, the company may gradually become less dependent on smartphones and more valuable as an AI infrastructure supplier.
However, this is not a low-valuation investment. The stock’s near-term earnings multiple is high, the target price uses demanding peer multiples, and the company is preparing for a major increase in capital spending.
The best way to understand the report is not to read the 1.75 million won price target as a promise. It is a bullish scenario showing what Samsung Electro-Mechanics could be worth if AI-related demand remains strong, MLCC pricing improves, advanced package sales expand, and the company successfully converts its large investments into long-term profits.
Attribution and disclaimer: This article is an independent, simplified English adaptation of the IBK Securities report “MLCC Price Increase: Do Not Underestimate It,” written by IT and semiconductor analyst Woonho Kim and published on July 31, 2026. The original report covers Samsung Electro-Mechanics and maintains a Buy rating with a price target of 1.75 million Korean won. The financial forecasts, estimates, valuation assumptions, and investment opinions described above belong to IBK Securities and the original analyst. This article is for informational purposes only and is not financial advice or a recommendation to buy or sell any security.
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