Silently Climbing to the Top... Will Samsung Electronics Become the World's Most Profitable Company? [Why&Next]

Samsung Electronics' Operating Profit Forecasts for Next Year Continue to Rise
Morgan Stanley Projects 631 Trillion Won
Could Become the World's Top-Earning Company Next Year

Yonhap News Agency

There is growing speculation that Samsung Electronics will overtake global giants such as Nvidia, Alphabet (Google), Apple, Amazon, and TSMC next year to become the world's No. 1 company in terms of operating profit. If this forecast turns out to be accurate, it would mark the first time ever that a Korean company has topped the world in terms of earnings, drawing keen attention from the market.

Securities Industry Continues to Raise Samsung Electronics' Operating Profit Estimates for Next Year

According to the financial investment industry on April 27, global investment bank Morgan Stanley recently raised its operating profit forecast for Samsung Electronics next year from 367 trillion won to 631 trillion won. This 631 trillion won forecast is the highest among all domestic and international securities firms.

Morgan Stanley expects the artificial intelligence (AI) industry to drive a prolonged surge in memory demand, positioning Samsung Electronics and SK hynix as major beneficiaries. Accordingly, Morgan Stanley also raised its operating profit forecast for SK hynix next year from 298 trillion won to 408 trillion won.

Morgan Stanley was once dubbed the "grim reaper of memory semiconductors" after releasing a 2024 report titled "Winter is coming for the memory semiconductor market," which triggered sharp declines in the share prices of Samsung Electronics and SK hynix. The firm, once the staunchest pessimist, has now become the most optimistic in just two years.

After Samsung Electronics and SK hynix posted first-quarter results that surpassed market expectations this year, both domestic and global securities companies have followed Morgan Stanley in raising their profit forecasts for the two firms.

Among foreign institutions, Macquarie forecasts next year's operating profit for Samsung Electronics and SK hynix at 477 trillion won and 447 trillion won, respectively. JP Morgan projects SK hynix's operating profit next year at 344 trillion won.

In contrast, many domestic securities firms remain more conservative in their performance outlooks. According to FnGuide, the consensus operating profit estimate for Samsung Electronics next year, based on reports from domestic securities firms over the past month, stands at 389 trillion won, while SK hynix is projected at 302 trillion won.

Among domestic securities firms, KB Securities has been the most aggressive in raising its forecasts. KB Securities now projects Samsung Electronics' operating profit at 327 trillion won for this year and 488 trillion won for next year, up 49% and 62% from previous estimates, respectively.

Kim Dongwon, Head of Research at KB Securities, stated, "Not only did memory semiconductor prices exceed expectations in the first quarter, but the upward trend is expected to intensify further into the second quarter and the second half of the year. As a result, we believe Samsung Electronics' operating profit has entered a full-scale acceleration phase starting in the first quarter of this year."

Kim further predicted that if Samsung Electronics achieves the projected operating profit of 488 trillion won next year, it will become the top company in the world in terms of operating profit. Nvidia is expected to rank second with a projected operating profit of 485 trillion won. SK hynix is forecast to come in third, with KB Securities expecting its operating profit to reach 358 trillion won next year. Aramco is projected to be fourth (323 trillion won), followed by Microsoft (283 trillion won), Alphabet (282 trillion won), Apple (248 trillion won), and Amazon (183 trillion won).

Sharp Profit Increase Expected to Strengthen Shareholder Returns

With performance forecasts being sharply revised upward, expectations for shareholder return policies are also rising. Samsung Electronics previously announced plans to use 50% of its free cash flow (FCF) for shareholder returns over the three years from 2024 to 2026. FCF refers to the money left after deducting capital expenditures or acquisition costs from the funds generated through business operations.

The securities industry believes that Samsung Electronics' steep profit improvement will result in cash accumulation, raising the likelihood of a special year-end dividend. Mirae Asset Securities predicts that Samsung Electronics' dividend per share could rise to around 8,110 won this year, based on an FCF estimated at 60 trillion won for this year. Hana Securities also forecasts 8,135 won.

Macquarie Securities previously analyzed in February that "Samsung Electronics may implement a special dividend of about 100 trillion won at the end of the year." Samsung Electronics' total annual dividend payout typically hovers around 10 trillion won. The company has paid out annual dividends of about 1,500 to 1,600 won per share for a 10 trillion won payout, but according to Macquarie's scenario, the special dividend alone could exceed 15,000 won per share. If Samsung Electronics' profit next year surpasses 600 trillion won as projected by some securities firms, next year's dividend could increase even further.

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