Samsung Electronics Stock 'Sparks' on Surprise Earnings... Still a Long Way to Go for '90,000 Electronics'

Securities Firms Maintain Samsung Electronics Target Price at 90,000~95,000 KRW
Q4 Semiconductor Segment Expected to Improve... Production Cuts and Price Increases Remain Key Factors

Samsung Electronics' third-quarter earnings recorded an 'earnings surprise' that far exceeded market expectations, and the stock price responded strongly on the 11th. However, there is still a long way to go to reach the target price of '90,000 won range' suggested by the securities industry. The dominant analysis is that a full-scale earnings rebound in the semiconductor sector will occur only after the fourth quarter.

Samsung Electronics announced preliminary consolidated results for the third quarter with sales of 67 trillion KRW and an operating profit of 2.4 trillion KRW, exceeding expectations by more than 2 trillion KRW. The photo was taken on the 11th at Samsung Electronics Seocho Building in Seoul. Photo by Jinhyung Kang aymsdream@

According to the Korea Exchange, Samsung Electronics' stock price closed at 68,200 won, up 2.71% from the previous trading day. During the session, it rose to as high as 69,400 won, attempting to recover to the 70,000 won range, but the gains narrowed in the afternoon. Foreign investors, who had been selling Samsung Electronics shares continuously since October, recorded a slight net purchase (31 billion won) for the first time in five trading days. Previously, from October 4 to 10 (four trading days), a total of 864 billion won of foreign capital had flowed out. On the day the earnings were announced, institutional investors also made a net purchase of 20.6 billion won.

The reason Samsung Electronics' stock price showed strength that day was due to the preliminary operating profit of 2.4 trillion won recorded in the third quarter. The market had expected an operating profit in the high 1 trillion won range, but the actual figure far exceeded that. Compared to the operating profits of around 600 billion won in the first and second quarters, the earnings recovery was stronger than expected. The preliminary earnings announced that day did not include operating profits by division, and the official earnings announcement is scheduled for the end of this month.

The key is semiconductors. Although the third-quarter operating profit exceeded expectations, the securities industry estimates that Samsung Electronics' semiconductor division still posted a deficit in the 3 trillion won range. SK Securities estimated a semiconductor division loss of 3.7 trillion won, Meritz Securities 3.4 trillion won, and Samsung Securities 3.6 trillion won. Although this is a reduction compared to the deficits in the 4 trillion won range recorded in the first and second quarters, it is still difficult to see it as a recovery.

Kim Sun-woo, a researcher at Meritz Securities, commented on the third-quarter earnings, saying, "Although memory shipment volume was disappointing, the solid smartphone profitability maintained under favorable exchange rates and the strong performance of the display (SDC) division contributed to a good overall result." He pointed out, "In the semiconductor sector, only memory posted an operating loss of 3.3 trillion won, continuing a poor performance." He added, "With the polarization of DRAM, it is urgent to expand the supply of high value-added products such as DDR5 and High Bandwidth Memory (HBM). From the perspective of expecting demand recovery next year, it is necessary for Samsung Electronics to maintain its production cut policy and express its intention to reduce capital expenditures."

The full-scale reduction in losses in the semiconductor division is expected to occur in the fourth quarter of this year. The key is whether Samsung Electronics maintains its existing production cut policy and whether price increases will occur in the first half of next year. For now, the securities industry has responded optimistically, maintaining most target prices in the 90,000 won range, buoyed by this strong earnings performance. Hwang Min-sung, a researcher at Samsung Securities, explained, "We expect DRAM prices in the fourth quarter to rise about 10% compared to the third quarter. The increase in memory semiconductor sales volume at the end of the quarter and the improvement in prices signal an improvement in fourth-quarter profitability."

Kim Kwang-jin, a researcher at Hanwha Investment & Securities, said, "It is true that the semiconductor earnings improvement in the third quarter fell somewhat short of initial market expectations, but it is necessary to focus on the confirmation that the price decline has ended." He added, "Ultimately, for a full-scale rebound in stock price and earnings, improvement in semiconductor division earnings is essential and is expected to begin in earnest from the fourth quarter." Hanwha Investment & Securities estimated that the semiconductor division's deficit for Samsung Electronics in the fourth quarter would be around 1.6 trillion won.

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