Meritz Securities raised its target price for Samsung Electro-Mechanics from 2.1 million Korean won to 2.2 million won while maintaining a buy rating. The previous trading day’s closing price was 1.486 million won. Researcher Yang Seung-su forecast third-quarter 2023 revenue of 3.82 trillion won and operating profit of 657.1 billion won, increases of 32.2% and 152.4% from a year earlier. The profit estimate is 9.3% above the market forecast of 601 billion won. Meritz attributed the improvement to price increases in distribution channels and a greater contribution from high-value-added AI products. The component business division’s operating margin is expected to exceed 20% for the first time in 18 quarters since the first quarter of 2022, while ABF margins are projected to top 30% as utilization rises and shipments of AI semiconductor and server CPU substrates expand to North American customers. The rise of agentic AI (AI systems that act with limited intervention) is increasing the importance of CPUs, which coordinate AI systems. That trend is broadening demand for Samsung Electro-Mechanics’ MLCCs (capacitors that stabilize power delivery) beyond AI accelerators and supporting ABF (substrates connecting chips to motherboards). The company has secured a long-term contract to supply ultra-small, high-capacity AI MLCCs to North American CPU manufacturers. CPU-related sales are estimated to account for more than 45% of ABF revenue when PC-related products are included, and the Vietnam factory is increasing shipments of sixth-generation server ABF to North American CPU manufacturers. Yang said continued upward profit-estimate revisions despite sharply worsening exchange-rate conditions are important to the investment case, with profit growth expected to sustain the company’s appeal.