[Click eStock] Samsung Electronics' Rebound... Year-End and New Year Stock Momentum Gap Period

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Shinhan Investment Corp. announced on the 16th that it maintains a Buy rating and a target price of 70,000 KRW for Samsung Electronics. The previous day's closing price was 59,300 KRW, indicating an upside potential of 18.1%.

Choi Do-yeon, a research fellow at Shinhan Investment Corp., stated, "The year-end and early-year period is a momentum gap for Samsung Electronics' stock price, and the timing for a price trend rally (bottoming) is expected in the first half of next year." He added, "The rally is expected to start with order expansion and a stabilization (halt in decline) of the 12-month forward earnings per share (EPS) consensus." He further noted, "This will occur when inventories at downstream customers are depleted and set shipments begin to increase," adding, "More time is needed to confirm this."

Fourth-quarter earnings are expected to show revenue of 77.3 trillion KRW (+0.6%) and operating profit of 7.9 trillion KRW (-27.3%), slightly below the consensus operating profit of 8.3 trillion KRW. Due to memory prices and shipment volumes falling short of expectations, semiconductor operating profit is projected to be 2.8 trillion KRW. Depending on year-end shipment volumes, the fourth-quarter estimates may be further revised downward. Operating profit by business division is forecasted as follows: Semiconductors 2.8 trillion KRW (-46.2%), MX (Mobile eXperience) 2.7 trillion KRW (-16.0%), DP (Display Panel) 1.9 trillion KRW (-6.2%), CE (Consumer Electronics) 0.5 trillion KRW (+108.7%).

First-quarter earnings next year are projected at revenue of 73.1 trillion KRW (-5.4%) and operating profit of 6.2 trillion KRW (-21.9%). Memory prices are expected to continue declining, and non-memory utilization rates are also likely to fall. The expected price declines during this period are 10% for DRAM and 12% for NAND. Recent inventory trends suggest that the price decline could be even greater.

If NAND prices fall an additional 25-30% in the first half of next year compared to the fourth quarter of 2022, it is estimated that second-tier companies will reach their cash cost. Due to a higher proportion of depreciation expenses compared to the past, the timing to reach cash cost has accelerated. NAND producers are expected to further cut production in the first half of next year. Apart from discussing the timing and strength of the market rebound, a support level for NAND prices is expected to form in the second quarter of next year.

Research fellow Choi said, "The 2023 earnings are forecasted at revenue of 307.3 trillion KRW (-0.6%) and operating profit of 32.9 trillion KRW (-29.9%). The non-semiconductor divisions are expected to have earnings similar to those of 2022, and most of the earnings decline will be determined by the semiconductor division."

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