Daol Investment & Securities on the 8th projected that Samsung Electronics could achieve about 33.6 trillion won in operating profit this year. It kept its "Buy" recommendation and raised its target price to 350,000 won from 290,000 won. The previous trading day's closing price for Samsung Electronics was 196,500 won.
Ko Young-min, an analyst at Daol Investment & Securities, said, "Even when we have aggressively anticipated the magnitude of price increases each time, the actual price increases have shown an even steeper slope," and noted, "The second quarter is also shaping up to beat mobile-based expectations, so the average selling price (ASP) uptrend will continue."
Samsung Electronics in the first quarter posted 133 trillion won in revenue and 57.2 trillion won in operating profit, delivering a surprise that beat market expectations.
Daol Investment & Securities analyzed that the backdrop to Samsung Electronics' first-quarter results was that commodity memory prices rose far more than expected. By segment, it estimated that semiconductors (DS) recorded 53.8 trillion won, device experience (DX) 2.6 trillion won, and display (SDC) 500 billion won.
In the memory segment, it estimated first-quarter ASP rose quarter over quarter by 100% for DRAM and 95% for NAND. It analyzed that operating margin (OPM) is 78% for DRAM and 57% for NAND, indicating profit maximization is underway.
It also expected ASP to rise more than 30% in the second quarter.
Ko said, "Previously, rapid price increases were centered on servers that could absorb high prices, but recently we detect a competitive atmosphere among mobile clients seeking to expand market share by turning the difficulty of procuring memory into an opportunity," adding, "Mobile demand is expected to serve as an additional driver for price increases in the second quarter."
It projected Samsung Electronics' revenue this year at 635.9 trillion won and operating profit at 335.9 trillion won. Revenue would be up 91% from a year earlier, and operating profit up 670%.
The company's long-term supply agreements (LTA) with key clients now underway are expected to be finalized soon, with shipments reflected from the third quarter. It explained that while LTAs do not unconditionally guarantee the medium-term cycle for commodity memory, price increase visibility is secured through the end of the year.
Ko said, "Clients are currently bearing high memory prices, but there are concerns that sustainability will be limited," adding, "It is important to set the magnitude of price increases each quarter so that clients can recognize in advance the price burden they must bear."