Samsung Electronics Disappointing in 2Q... Operating Profit Expected to Fall 14% YoY

2Q Sales 50.5 Trillion KRW, Operating Profit 5.6 Trillion KRW Expected
Semiconductors Performed Well but Smartphone and Display Sluggish

[Asia Economy Reporter Minwoo Lee] Samsung Electronics is expected to report somewhat disappointing results in the second quarter. Both sales and operating profit are forecasted to decline by double digits compared to the same period last year. This quarter reflects the greatest impact of the novel coronavirus disease (COVID-19). However, from the third quarter onward, there are expectations that performance will improve due to increased smartphone demand and semiconductor shipments.

On the 14th, NH Investment & Securities projected Samsung Electronics' second-quarter sales at 50.574 trillion KRW and operating profit at 5.65 trillion KRW. Compared to the second quarter of last year, sales are expected to decrease by 9.9%, and operating profit by 14.4%. The operating profit estimate was about 700 billion KRW below the market consensus of 6.301 trillion KRW.

The smartphone and display divisions experienced greater declines than the semiconductor division. The semiconductor division's second-quarter sales reached 19.221 trillion KRW, a 19.5% increase year-on-year. Operating profit was 5.183 trillion KRW, up 52.4% from the second quarter of last year. In contrast, the smartphone (IM) division is expected to report sales of 20.253 trillion KRW and operating profit of 1.068 trillion KRW, down 21.7% and 31.6%, respectively, compared to the same period last year. The display division's sales are estimated at 6.294 trillion KRW, a 17.4% decrease, with an operating loss of 722 billion KRW, marking a return to the red.

However, this downturn is expected to gradually improve starting in the third quarter. Do Hyunwoo, a researcher at NH Investment & Securities, explained, "As the world partially recovers from the impact of COVID-19, smartphone demand is recovering," adding, "One-time gains from the display division, which were reflected in the second-quarter estimates, will also be accounted for in the third quarter."

Against this backdrop, NH Investment & Securities maintained a 'Buy' investment rating on Samsung Electronics with a target price of 66,000 KRW. The previous trading day's closing price was 54,300 KRW. Researcher Do stated, "The stock price showed weakness due to the second-quarter earnings downturn forecast and the sharp drop in the KRW-USD exchange rate, which reflected concerns about memory price declines after the third quarter," and recommended, "An investment strategy focusing on third-quarter earnings improvement rather than second-quarter earnings weakness."

This content was produced with the assistance of AI translation services.