[Click eStock] 'Back to 50,000 Electronics', Production Cut Participation Expected... Target Price is 80,000 Won

Daishin Securities announced on the 15th that it maintains a Buy rating and a target price of 80,000 KRW for Samsung Electronics. It also kept Samsung Electronics as its top pick within the industry. This is based on the expectation that earnings will gradually improve from the first quarter low. In particular, it is anticipated that a decision to cut production to maximize profitability is highly likely.

For the first quarter of this year, Samsung Electronics' sales are forecasted at 72.142 trillion KRW, with operating profit at 1.044 trillion KRW. Minbok Wi, a researcher at Daishin Securities, stated, "Due to the semiconductor market downturn, we have lowered Samsung Electronics' first-quarter estimates by -15% for DRAM production volume and -28% for average selling price (ASP), adjusting the ASP from -25% to -28%. However, we raised the mobile division's operating profit estimate by 50 billion KRW due to positive consumer response to the Galaxy S23. Based on these revised estimates, the company's first-quarter operating profit is expected to reach 1 trillion KRW."

Production cuts are also expected. Researcher Wi noted, "We view the optimism about 2023 demand growth as a bluff intended to induce competitors to further reduce investments, rather than Samsung Electronics' actual outlook. Given that DRAM profitability has fallen to historically low levels, further bluffing lacks credibility, and Samsung Electronics is expected to join in production cuts."

Furthermore, regardless of whether Samsung Electronics cuts production, the possibility of entering an upcycle due to supply adjustments in the semiconductor industry is increasing. He said, "The target during the upcycle is a price-to-book ratio (PBR) of around 1.6," adding, "Earnings will gradually improve from the first-quarter bottom, and through this semiconductor downcycle, Samsung Electronics is expected to expand its technological superiority in both DRAM and NAND sectors." Finally, Researcher Wi expressed, "It is a situation where performance improvements can be accelerated at any time through artificial production cuts," and he expects, "investment and the scale of production cuts for maximizing mid- to long-term profitability will be determined."

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