[Click eStock] Samsung Electronics Strengthens Pricing Negotiation Power from Q2... Greater Earnings Improvement Expected in Second Half

Investment Opinions and Risk Factors

[Asia Economy Reporter Yoonju Hwang] KB Securities maintained its 'Buy' rating and a target price of 100,000 KRW for Samsung Electronics on the 22nd, stating that pricing power is expected to strengthen from the second quarter.

Dongwon Kim, a researcher at KB Securities, said, "Currently, both customers and memory manufacturers are experiencing a simultaneous decline in DRAM and NAND inventory," adding, "Therefore, the average selling price (ASP) of NAND is expected to turn upward from the second quarter (1Q -3% → 2Q +3% QoQ), and DRAM ASP is also expected to turn upward from the third quarter."

Researcher Kim analyzed, "As of the first quarter, the memory inventory of server and PC companies has entered a normal level, and the memory inventory of mobile companies such as Samsung Electronics and Apple is below normal levels, while Chinese companies have entered a declining trend since February," adding, "This is expected to act as a factor improving memory supply and demand in the second quarter."

He continued, "Especially since memory prices are greatly influenced by psychological factors, major customers are expected to start securing safety stock through partial price increases of memory from the second quarter."

Researcher Kim stated, "Samsung Electronics' first-quarter performance is expected to show sales of 74.4 trillion KRW (-2.9% QoQ, +13.8% YoY) and operating profit of 13.4 trillion KRW (-3.2% QoQ, +43.1% YoY, operating margin 18.0%), exceeding consensus operating profit."

He evaluated, "Although Samsung Electronics' stock price fell 5.6% compared to the beginning of the year due to discount issues such as foundry yield problems and lack of growth, it is expected that from the second half of the year, performance improvement and resolution of discount factors will lead to an upward trend."

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