Samsung Electronics Weakened Despite Strong Performance... "Concerns Are Overblown"

Despite strong earnings, stock price remains around 80,000 won
Institutions continue selling... Already sold 2.4 trillion won this month
Performance improvement starts from 2Q... Earnings expected to rise this year

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Despite Samsung Electronics posting strong earnings in the first quarter of this year, institutional investors have continued to withdraw steadily, leaving the stock price stagnant. As earnings improvement is expected to accelerate from the second quarter, there is an assessment that the stock has sufficient potential for growth.

As of 9:40 a.m. on the 29th, Samsung Electronics' stock price recorded 81,700 won, down 0.49% from the previous day. Since January 29, when it dropped from the 85,000 won range to the 82,000 won range in a single day, it has remained in the low 80,000 won range, moving sideways. This contrasts sharply with the rapid 71% rise from 56,600 won on October 30 last year to an all-time high of 96,800 won after the stock split on January 11 this year.

Institutional investors have also been continuously withdrawing. This month alone, they have net sold 2.4056 trillion won worth of shares up to the previous day. They have sold for 18 consecutive trading days since the 3rd. This is the longest consecutive net selling record in the past five years. Monthly trillion-won scale sell-offs have continued this year with 5.8538 trillion won in January, 1.8629 trillion won in February, and 1.908 trillion won in March. Although institutional net selling began in July last year, the scale of selling has increased further this year. The total net selling amount in the second half of last year was 3.6177 trillion won, which is only 61.8% of January's net selling amount this year.

The securities industry views this as an overreaction. Won-sik Lee, a researcher at Korea Investment & Securities, said, "The reasons for Samsung Electronics' undervaluation include concerns over deteriorating performance in the set business division due to rising component prices and slower-than-expected improvement in competitiveness in the foundry business division. Nevertheless, in the second half of the year, as long as DRAM prices continue to rise and competitiveness in non-memory semiconductors improves, there is considerable potential for growth."

Contrary to concerns, the first quarter of this year showed solid results. Samsung Electronics announced confirmed consolidated earnings for the first quarter of this year with sales of 65.3885 trillion won and operating profit of 9.3829 trillion won. These figures represent increases of 18.2% and 45.5%, respectively, compared to the same period last year. For the first time ever, first-quarter sales exceeded 65 trillion won. Earnings improvement is expected to continue into the second quarter. According to financial information provider FnGuide, Samsung Electronics' earnings forecast for the second quarter of this year is sales of 61.7343 trillion won and operating profit of 9.9876 trillion won, expected to increase by 16.6% and 22.6%, respectively, compared to the same period last year.

Researcher Lee predicted, "With the semiconductor division's earnings improvement gaining momentum, the total operating profit for this year will exceed the market expectation of 47.7 trillion won and reach 49 trillion won."