Samsung Electro-Mechanics Surges After Morgan Stanley Names Top Pick

On August 13, Samsung Electro-Mechanics experienced a significant surge in its stock price, driven by Morgan Stanley's selection of the company as its top pick among South Korean technology stocks. The stock opened at 1.52 million won ($1,074), marking a 13.26% increase from the previous trading session. Investors were quick to take notice, causing the stock to rise rapidly and reach over 1.5 million won levels during the day's trading.

Morgan Stanley's favorable research note played a crucial role in the stock's surge. The investment bank changed its preferred domestic technology stock from Samsung Electronics to Samsung Electro-Mechanics and maintained its "Overweight" rating. They raised their target price from 2.56 million won to 2.62 million won, projecting that the company's profitability and earnings per share would exceed market expectations.

The bank's positive outlook was based on two key factors: the growing demand for AI data centers and the company's expanding focus on AI-related businesses. Morgan Stanley forecasted that AI would account for 20% of Samsung Electro-Mechanics' sales this year and expand to 31% next year, with AI revenue more than doubling. They also noted the company's potential in the ABF substrate business, which could increase fourfold to fivefold by 2030.

The positive market environment, with easing inflation concerns, also contributed to the stock's rise. Major semiconductor stocks, including Micron, rose in New York trading, and Samsung Electronics and SK hynix also gained between 4% and 8% in the domestic market. Despite the stock's strong performance, Morgan Stanley believed the current share price did not fully reflect the company's growth prospects.

They projected a 2028 price-to-earnings ratio of about 18 times, significantly lower than its historical peak of 30 times, while maintaining a bullish scenario target price of 3 million won.