Samsung Electronics Enters 90,000 Won... Aiming for 10 Trillion Operating Profit in 1Q

Operating Profit Expected to Approach 50 Trillion This Year
Semiconductor Demand Increases and Galaxy S21 Effect...Improved Performance Expected Across All Sectors

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Samsung Electronics, which recorded 90,000 KRW during the previous day's trading session, is expected to surpass 10 trillion KRW in operating profit for the first quarter of this year. Analysts predict growth driven by rising DRAM prices and the early launch effect of the Galaxy S21.

On the 9th, Hi Investment & Securities forecast that Samsung Electronics will achieve sales of 60.706 trillion KRW and an operating profit of 10.072 trillion KRW in the first quarter of this year. This represents a 9.7% increase in sales and a 56.2% increase in operating profit compared to the same period last year. Despite reduced profits in the Consumer Electronics (CE) and Display divisions, recovery in the Semiconductor division and improvements in the Smartphone (IM) division are expected to be key factors.

Initially, the average selling price (ASP) of DRAM was expected to slightly decline in the first quarter, but it is now projected to increase by 2-3%. This is due to anticipated increased orders from customers for PC and mobile DRAM, as well as some US IDC companies increasing orders for server DRAM, while semiconductor companies’ inventories remain extremely low, leading to a supply shortage. By segment, PC DRAM ASP is estimated to rise by 5%, server DRAM by 3%, and mobile DRAM to remain stable. NAND flash ASP is also expected to decline by only 3-4%, significantly narrowing the drop compared to the previous quarter.

In the IM division, smartphone shipments are expected to increase to 73.5 million units due to the early launch of the Galaxy S21 and inventory adjustments in the fourth quarter of last year. Additionally, with a higher proportion of premium phones, operating profit is expected to rise to 3.947 trillion KRW, a 48.9% increase compared to the same period last year.

Samsung Electronics’ overall quarterly operating profit is expected to improve significantly from the third quarter onward, driven by increased shipments and ASP growth in the semiconductor division. Reflecting a faster-than-expected recovery in the semiconductor market, Hi Investment & Securities projects Samsung Electronics to achieve annual sales of 255.21 trillion KRW and operating profit of 49.841 trillion KRW this year. These figures are upward revisions from previous forecasts of 251.1 trillion KRW in sales and 47.7 trillion KRW in operating profit, representing increases of 7.8% and 38.6% respectively compared to the previous year.

Based on these factors, the investment opinion on Samsung Electronics remains 'Buy,' with the target stock price raised from 96,000 KRW to 100,000 KRW. The closing price on the previous day was 88,800 KRW, with an intraday high of 90,000 KRW. Song Myungseop, a researcher at Hi Investment & Securities, explained, "Samsung Electronics’ first-quarter and full-year earnings are expected to exceed market expectations. Despite the recovery in the semiconductor market and increased customer orders, semiconductor companies are expected to maintain production facilities at last year’s levels. Historically, the year-on-year change in global liquidity, which has had a decisive impact on the valuation multiples of IT stocks including Samsung Electronics, is maintaining an all-time high level, suggesting that the stock price is likely to continue its upward trend for the time being."