Meritz Securities said on the 3rd that Samsung Electronics is expected to set fresh record quarterly operating profits all year on the back of competitiveness in memory and Mobile eXperience (MX). It kept a "buy (BUY)" rating and raised its target price to 250,000 won from 210,000 won. Samsung Electronics closed the previous session at 178,400 won.
Kim Sun-woo, an analyst at Meritz Securities, said, "Pricing power is overwhelming rivals that supply to cloud service providers (CSPs) and original equipment manufacturers (OEMs)," and added, "The resistance to price hikes in business-to-consumer (B2C) products such as mobile and PCs, which had been a concern, is also unlikely to materialize easily amid competition to secure parts."
Meritz Securities projected Samsung Electronics' first-quarter operating profit this year at 5.339 trillion won. That would far exceed 2.01 trillion won in the fourth quarter of last year, when the memory upcycle began in earnest.
Kim said, "The surprise in this year's results is likely to show up not only from memory operating leverage but also from an MX earnings surprise," adding, "Amid the recent weak won trend, various cost-cutting efforts combined with partial price hikes for flagship models are expected to deliver strong results."
Operating profit in the memory segment is estimated at 5.03 trillion won, a record high. The brokerage cited the low sales mix of High Bandwidth Memory (HBM), where price hikes are moderate, and an active and aggressive pricing strategy maintained throughout the quarter in commodity markets such as NAND and DRAM.
For the MX segment, it projected 400 billion won in operating profit. That reflects smartphone shipments of about 59.5 million units, along with cost efficiencies and the cost effect of components already in inventory. It expects the impact of the sharp rise in memory prices to start affecting results from the second quarter this year.
Samsung Electronics' operating profit in the second and third quarters this year is estimated at 7.34 trillion won and 9.03 trillion won, respectively. It forecast operating profit of 32.2 trillion won for this year and 46.4 trillion won for next year.
Meanwhile, Kim said, "In addition to solid results, a clear shareholder return policy is expected to drive not only a relative advantage over competitors in the company's share price but also a rerating."