[Click eStock] "Samsung Electronics Q1 Operating Profit Expected at 6.2 Trillion KRW... Target Price Down 9%"

[Asia Economy Reporter Minji Lee] Daishin Securities downgraded its earnings estimates for Samsung Electronics on the 2nd but maintained a buy rating, setting a target price 9% lower than before at 68,000 KRW.

In the first quarter, the company's sales are estimated to decrease by 5% from the previous quarter to 56.97 trillion KRW. Operating profit is expected to decline by 13% to 6.24 trillion KRW. By business division, semiconductor (3.8 trillion KRW), display (-220 billion KRW), IT mobile (2.32 trillion KRW), and home appliances (350 billion KRW) are projected.

The semiconductor memory sector's overall demand and supply volume (B/G) was revised downward due to the impact of COVID-19. Daishin Securities analyst Soobin Lee explained, "DRAM decreased by about 8% and NAND by about 5% compared to before," adding, "The poor performance in the first quarter was largely due to weak demand from China in the server, smartphone, and PC sectors."

The display division's smartphone OLED panel ratio accounts for 89% of sales and is the business segment most affected by COVID-19. Analyst Soobin Lee said, "The sluggish panel shipment is expected to continue through the second quarter," and added, "The rise in TV LCD panel prices is temporary, and TV set shipments are also expected to decline."

The IM division saw smartphone shipments decrease from 307 million units to 287 million units due to weak Galaxy S20 sales and limited marketing activities caused by COVID-19. The home appliance division's shipments were revised downward due to weak TV demand. Annual shipments for 2020 are expected to decline due to poor sports events.

Annual operating profit for this year is forecasted to increase by 25% year-on-year to 35.1 trillion KRW. This is based on the expectation that the semiconductor division will grow by 68% to 23.6 trillion KRW. However, operating profits in the display (660 billion KRW, -58%), IM (8.92 trillion KRW, -4%), and home appliance (2.05 trillion KRW, -21%) divisions are expected to decrease compared to last year.

Analyst Soobin Lee stated, "The company's production DRAM B/G is at 13%, and NAND B/G is at 15%, which is conservative considering inventory levels," and added, "New expansions are involuntarily delayed due to COVID-19, so if necessary, voluntary supply adjustments are also expected to be possible."