SEMCO
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
View concerns towards MLCC as being overblown
Despite a global demand slowdown for IT devices, SEMCO booked consensus-beating 1Q23 results. With parts inventory adjustments having wrapped up, global IT device demand is forecast to pick up in 2H23. In line, business conditions for MLCC and substrates should recover through the year. We view a recent share price adjustment as offering a good buying opportunity.
SEMCO booked consensus-topping 1Q23 OP of W140bn (-65.9% y-y, +38.3% q-q; OPM of 6.9%). With Chinese smartphone makers having finished their inventory adjustments, MLCC orders upped. Automotive MLCC orders remained solid amid growing demand for EVs and automotive electronics parts.
We expect SEMCO to enjoy solid earnings in 2Q23, backed by new product launches at Chinese smartphone makers, inventory stocking to prepare for peak season in 2H23, and sustained MLCC demand growth. That said, we slightly revise down our 2023 earnings estimate to reflect a decline in MLCC ASP, in line with a widening IT sales portion for Chinese clients.
Although SEMCO’s share price has been adjusted due to growing worries over smartphone demand slowdown, we view such concerns as being excessive, pointing out that smartphone sales are highly likely to recover in 2H23 backed by active promotions and y-y base effects.