[Click eStock] "Samsung SDS, Cloud Revenue Growth Expected"

DB Financial Investment Report

[Asia Economy Reporter Minji Lee] DB Financial Investment maintained its buy rating and target price of 180,000 KRW for Samsung SDS on the 29th.

In the first quarter, Samsung SDS recorded sales of 4.1915 trillion KRW, a 36.9% increase compared to the same period last year. Operating profit was 273.5 billion KRW, up 26% from the same period last year, exceeding the market expectation of 237 billion KRW.

Seongryul Kwon, a researcher at DB Financial Investment, said, “The one-time cost shock in the fourth quarter of last year normalized, and the IT services operating profit margin recovered to the 14% range. Considering rising labor costs and investments in the cloud business, it is still premature to say that IT service profitability is on a full improvement trend, but as the proportion of profitable cloud sales gradually increases, it will be able to offset the rising costs.” Logistics entered the 2% operating profit margin range for the first time since 2017 due to strong freight rates and increased cargo volume.

In the second quarter, operating profit is expected to slightly decrease compared to the first quarter due to wage increases, but IT service sales are expected to increase. Cloud sales are increasing every quarter and are projected to reach 1.0593 trillion KRW this year, a 21% increase from 873.1 billion KRW last year. Along with the increase in cloud sales, IT service profit margin is also expected to improve from 11.8% last year to 13% this year.

Researcher Kwon said, “It is necessary to observe the trend of IT services bottoming out and rising in terms of growth and profitability due to cloud and solution businesses. The PER (price-to-earnings ratio), which used to trade around 20 times, is now at about 14 times, making the valuation very attractive.”

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