[Click eStock] Samsung Electronics, Recommended as Top Pick for 'Overweight' Sector

On the 28th, Korea Investment & Securities maintained its investment opinion of "Buy" and overweight on Samsung Electronics, with a target price of 83,000 KRW.

Cha Min-sook, a researcher at Korea Investment & Securities, stated, "With customer inventory adjustments and supplier production cuts coinciding, the overall industry inventory depletion is expected to accelerate," adding, "From the second half of the year, the improvement in the memory market and the increase in foundry utilization rates are expected to clearly improve the DS division's performance, making it our top pick within the sector."

In the first quarter, sales reached 63.75 trillion KRW and operating profit was 640 billion KRW, falling short of the consensus sales of 64 trillion KRW and operating profit of 1 trillion KRW. Operating profit decreased by 85% quarter-on-quarter and 95% year-on-year, largely due to the DS division recording a loss of 4.58 trillion KRW. The memory inventory valuation loss is estimated to be in the mid-1 trillion KRW range, increasing by more than 50% compared to the previous quarter. Despite a decrease in smartphone shipments, the MX division recorded an operating profit of 3.94 trillion KRW due to an increase in ASP through expanded premium phone sales. The SDC operating profit decreased to 780 billion KRW quarter-on-quarter due to a decline in iPhone 14 sales. The CE division turned to a profit with an operating profit of 190 billion KRW.

The second quarter is expected to mark the lowest quarterly performance. Sales are projected at 62 trillion KRW and operating profit at 290 billion KRW, forming the lowest point in quarterly performance. The display segment is entering its seasonal low, and MX is expected to see a decline in performance compared to the first quarter as the effect of the Galaxy S23 new product launch diminishes. Memory is expected to continue operating at a loss due to ASP decline and inventory valuation losses. However, from the second quarter, memory shipments are expected to increase, and inventory is anticipated to start decreasing as the effects of production cuts are reflected. In addition to ongoing natural production cuts, artificial production cuts reducing wafer input will also be implemented.

Researcher Cha analyzed, "The rate of quarterly contract price reductions continues to shrink, and from the second half of the year, the effect of supply adjustments will become more apparent, so the decline in contract prices is expected to be limited," adding, "Annual CAPEX will be maintained at a level similar to the previous year but will focus on infrastructure investment and R&D investment in preparation for the mid- to long-term."

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