[Click eStock] "Samsung Electronics, 4Q Earnings May Fall Short of Expectations... But Foundry Optimism is UP"

Operating Profit Expected at 9 Trillion Won... Due to Won Strength and Weak Smartphone Shipments
Foundry Business Growth Expectations..."Potential Business Value of 100 Trillion Won"

Samsung Electronics announced on May 21 that it will establish a foundry production facility at its Pyeongtaek Campus in Gyeonggi-do to respond to the increasing demand for cutting-edge products based on EUV (Extreme Ultraviolet) technology. The photo shows an aerial view of the Pyeongtaek Campus. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Samsung Electronics' fourth-quarter earnings are expected to fall short of initial forecasts due to currency exchange rate impacts and sluggish smartphone sales. However, the foundry business value is gradually increasing, suggesting potential for additional growth in the future.

On the 30th, Korea Investment & Securities raised Samsung Electronics' target stock price by 14% to 92,000 KRW, citing these factors. The previous day's closing price was 78,300 KRW. The investment rating was maintained at 'Buy.'

Samsung Electronics' fourth-quarter earnings this year are projected at 60.723 trillion KRW in sales and 9.007 trillion KRW in operating profit. While sales are in line with initial expectations, operating profit is expected to fall about 5% short. Researcher Jongwoo Yoo of Korea Investment & Securities explained, "The won's strength persisted throughout the fourth quarter, negatively impacting profits in the components business," adding, "Smartphone shipments are also expected to reach 60 million units, about 7% below initial forecasts." However, strong demand for home appliances continued, and OLED panel shipments met expectations.

Meanwhile, the foundry business is beginning to be fully reflected in value. Researcher Yoo stated, "As the PC and server CPU market, once led by Intel, diversifies into ARM architecture-based microprocessors, the foundry value of Taiwan's TSMC and Samsung Electronics, which have advanced process technology, is increasing," adding, "Although Samsung Electronics is still facing challenges in securing yield for 5-nanometer technology, the stock price is rising due to expectations of benefiting from foundry market growth." Securing 5-nanometer yield is expected to improve foundry business profitability and further enhance Samsung Electronics' foundry competitiveness and business value.

Against this backdrop, Korea Investment & Securities raised Samsung Electronics' 2021 target price-to-book ratio (PBR) from 1.8 times to 2.1 times, a 17% increase. Researcher Yoo forecasted, "The potential foundry business value included in the 2.1 times PBR is around 100 trillion KRW," adding, "Moreover, Samsung has maintained a predictable shareholder return policy over the past three years, and the shareholder return policy to be announced in January next year is expected to continue this trend, contributing to an increase in corporate valuation."

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