[Click eStock] "Samsung Electronics, Target Price ↓... Q3 Earnings Expected to Fall Short of Estimates"

Fourth Target Price Downgrade Opinion

On the 11th, Korea Investment & Securities lowered the target price for Samsung Electronics to 96,000 KRW, stating that the third-quarter earnings are expected to fall short of estimates. However, the investment rating was maintained at 'Buy.'

Researcher Cha Min-sook of Korea Investment & Securities stated, "The third-quarter revenue is expected to be 79.3 trillion KRW, 5% below consensus, and operating profit is expected to be 10.3 trillion KRW, 23% below consensus." In particular, the third-quarter operating profit is forecasted to be lower than the second quarter's 10.4 trillion KRW.

Researcher Cha analyzed, "As smartphone manufacturers' memory inventory has increased again to 13-14 weeks, shipments of both DRAM and NAND are expected to decrease compared to the previous quarter, and the increase in average selling price (ASP) will be limited to single digits (%)." Additionally, the one-time increase in semiconductor (DS) division's excess profit sharing (PS) provisions is cited as another cause of the third-quarter profit decline.

Regarding NAND, Cha said, "Except for enterprise solid-state drives (SSD), sales of PC SSDs and mobile universal flash storage (UFS) are estimated to be sluggish due to high inventory levels at customer companies." He also diagnosed, "Samsung Electronics still has a relatively low proportion of leading-edge 1a process compared to competitors, and since 1a is allocated simultaneously to DDR5 and HBM, the supply of high value-added products is unlikely to be smooth."

Ultimately, this means that the sales proportion of general DRAM such as DDR4, which has a relatively low ASP, is high, putting Samsung at a disadvantage in terms of product mix and blended ASP.

Samsung Electronics plans to sharply increase HBM sales starting in the fourth quarter. Researcher Cha evaluated, "If the proportion of high-end products increases, the fourth quarter can be expected to see profit growth compared to the third quarter."

He added, "The stock price has already sharply reflected a downturn level at 1.1 times, so the adjustment is excessive," and "Considering the lowered stock price, there should be sufficient upside potential upon rebound."

Meanwhile, securities firms have been consecutively lowering Samsung Electronics' target price since last week. Korea Investment & Securities is the fourth to lower the target price, following DB Financial Investment, KB Securities, and Hyundai Motor Securities.