In a sector report published on 11th August 2026, Yuanta Securities named Samsung Electro-Mechanics, Daeduck Electronics, and Haesung DS as its top picks in the electrical and electronics sector, arguing that a rising share of high-value-added products will drive earnings higher through the second half of the year.

Earnings surprises confirm the thesis

The centrepiece of Yuanta's analysis is the string of profit beats recorded during the second-quarter results season (April–June 2026). Samsung Electro-Mechanics reported operating profit of 440.4bn won for the period, equivalent to a 12.7% operating margin. That figure came in 8.5% above consensus and represented a 106.8% jump from the 213.0bn won posted in the same quarter a year earlier. Daeduck Electronics followed on 31st July with operating profit of 70.3bn won and a 17.5% margin — a near-vertical recovery from just 2.0bn won a year ago, effectively a return to profitability. Haesung DS, reporting on 29th July, recorded operating profit of 25.0bn won at an 11.8% margin, up 202.6% year on year.

The common thread running through all three results is structural: rising blended average selling prices driven by greater exposure to high-margin products destined for AI data centres. Samsung Electro-Mechanics has expanded its share of AI-server-grade multilayer ceramic capacitors (MLCCs) and flip-chip ball-grid-array (FC-BGA) substrates through a series of long-term supply agreements (LTAs). Daeduck Electronics benefited from memory-related price increases and saw its FC-BGA utilisation rate climb from the mid-70% range in the first quarter to close to 90% in the second. At Haesung DS, new data-centre demand pushed up lead-frame prices, while a stabilisation in copper — the company's key raw material — provided additional margin relief.

A structural shift, not a one-off

Yuanta's analysts stress that the earnings surprises reflect durable rather than transient factors. The brokerage forecasts Samsung Electro-Mechanics will deliver full-year 2026 operating profit of 1.962tn won, up 114.8% on the prior year, rising further to 3.673tn won in 2027, a gain of 87.2%. For Daeduck Electronics, the projections are 286.4bn won in 2026 (up 483.3%) and 435.4bn won in 2027 (up 52.1%).

The backdrop remains supportive. Alphabet has raised its 2026 capital-expenditure guidance twice in succession, to a range of $195bn–$205bn, and Amazon has lifted its own target from $200bn to $220bn. Across the four largest American technology platforms — Alphabet, Amazon, Microsoft, and Meta — combined year-on-year capital-expenditure growth widened from 61.5% in the first quarter to 82.5% in the second. Physical demand data corroborate the picture: Quanta Computer, the Taiwanese server original design manufacturer, has sustained monthly revenue growth of between 95% and 120% on a three-month rolling basis.

MLCC supply tightens; a price cycle begins

Unusual signals are emerging in the MLCC market. Book-to-bill ratios — a measure of incoming orders relative to shipments — have surged to 1.47 times at Japan's Murata, 1.72 times at Taiyo Yuden, and as high as 2.2 times at Taiwan's Yageo. Orders are piling up while inventories remain lean, pointing to a tight supply-demand balance. In response, Samsung Electro-Mechanics raised prices across its full product range for distribution-channel customers by approximately 30% from August. Notably, neither Murata nor Samsung Electro-Mechanics has yet implemented equivalent increases for its largest direct customers. Yuanta interprets this as an early indicator that a broader pricing cycle is beginning to take hold.

Investment case and valuations

Yuanta maintains a buy recommendation on Samsung Electro-Mechanics with a target price of 2,300,000 won, implying upside of approximately 81% from the 10th August closing price of 1,274,000 won. Its target price for Daeduck Electronics is 180,000 won, offering 67% potential upside, while Haesung DS is initiated with a target of 75,000 won and implied upside of 33%.

Reasons for caution

The bullish case is not without risks. Foreign and institutional investors have remained largely on the sidelines since results were announced, refraining from any significant increase in buying activity. Share prices fell by double-digit percentages for two consecutive months through July and have shown tentative signs of recovery in August, but conviction has not yet translated into sustained buying pressure.

Several structural risks also bear watching. MLCC capacity additions carry a lead time of only around six months, meaning that a broader industry recovery could quickly invite competitive supply responses that cut short the pricing upswing. Furthermore, big-tech capital spending appears to be shifting from a phase of aggressive scale expansion to one in which the profitability of AI infrastructure is more rigorously tested — a transition that could deepen qualitative divergence across the supply chain, rewarding the most capable suppliers while leaving others exposed.

Long-term commitments underpin the outlook

For the Korean substrate industry more broadly, the spread of LTAs to Tier 2 and Tier 3 suppliers, alongside pre-emptive capacity investment, is cited by Yuanta as evidence of structural rather than cyclical growth. Samsung Electro-Mechanics has announced a long-term investment plan of 23tn won at its Busan and Sejong facilities through to 2040. Daeduck Electronics intends to commit approximately 800bn won to capacity expansion over 2026 and 2027. Critically, much of this capital expenditure is being partially pre-funded by advance payments from big-tech customers, suggesting that LTAs are evolving into something more than volume contracts — they are becoming earnings buffers that provide a degree of downside protection even if the broader demand environment turns less favourable.