[Good Morning Stock Market] Eyes on Samsung Electronics' Earnings Announcement

[Image source=Yonhap News]

[Asia Economy Reporter Park Ji-hwan] On the 7th, Samsung Electronics will announce its Q2 earnings. The securities industry has shown mixed reactions to Samsung Electronics' Q2 performance.

◆ Kim Un-ho, IBK Investment & Securities Researcher = Samsung Electronics' Q2 sales this year are expected to be 48.484 trillion KRW, a 12.4% decrease compared to Q1. Consumer goods sales such as display, mobile, and CE, which are expected to be most affected by the novel coronavirus (COVID-19), are anticipated to be significantly sluggish. However, Samsung Electronics' Q2 operating profit for 2020 is expected to increase by 18.2% from Q1 to 7.622 trillion KRW. The semiconductor and display divisions are expected to see profit growth compared to Q1. The business conditions by division for Samsung Electronics in Q2 2020 are expected to be differentiated. Semiconductor demand is improving mainly in servers, leading to expected performance improvement compared to Q1. However, the pace of performance improvement is expected to slow in the second half of the year. The display division is expected to face a weak operating environment compared to Q1 due to restructuring, panel price declines, and reduced operating rates. The mobile sector is also expected to perform significantly worse than in Q1. Although efforts to reduce costs will somewhat defend profitability, it will be difficult to escape the impact of shipment declines and poor product mix. Nevertheless, a significant performance improvement is expected in the second half of the year.

◆ Seo Sang-young, Kiwoom Securities Researcher = The Korean stock market rose yesterday, buoyed by the Chinese stock market's surge of over 5%. In particular, the improved investment sentiment due to rising expectations for global economic recovery, including China, had a positive effect. The U.S. stock market's rise today, driven by improved indicators and strong performance of FAANG companies, is positive for investment sentiment. Expectations for economic recovery and the strength of untact-related companies such as Amazon were partially reflected the previous day, but the Tesla effect is expected to bring favorable results to related stocks, leading to a market driven by individual stocks.

Attention should also be paid to Samsung Electronics' earnings announcement. One characteristic of the U.S. stock market is that stocks with high expectations for earnings improvement have led the rise. The Q2 operating profit is forecasted at 6.6 trillion KRW, slightly below the market consensus of 6.8 trillion KRW. This is because DRAM and NAND prices and demand were generally weak in Q2. Additionally, considering Samsung Electronics' 2.61% surge the previous day, even if earnings improve, some of it has been pre-reflected, so Samsung Electronics' earnings announcement is likely to act as a neutral issue. The Korean stock market is expected to fluctuate based on individual company issues rather than the index, and, as on the previous day, fluctuations are expected depending on foreign investors' futures supply and demand and changes in the Chinese stock market.