Dividends Exceed Expectations
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
Maintain BUY, target price of KRW175,000
We maintain BUY and TP of KRW175,000 on Samsung SDS. Highlights include anticipated benefits from the rapidly growing cloud market and massive cash/cash equivalent holdings (KRW5.03tn on consolidated basis) amid high levels of uncertainty.
4Q22 review: OP of KRW187.5bn below market consensus
Samsung SDS posted 4Q22 OP of KRW187.5bn (+30% YoY), which is below our estimate of KRW200.5bn (IT Services at KRW150.4bn, Logistics BPO at KRW49.6bn) and the market consensus of KRW199.9bn. IT Services OP fell below our estimate at KRW130.6bn, while Logistics BPO OP exceeded our estimate at KRW56.9bn. IT Services took a hit from client delays/canceled IT investments amid concerns over an economic slowdown. Logistics BPO outperformed largely due to a jump in land freight revenue, which offset a drop in marine freight revenue, and logistics platform Cello Square’s foray into Southeast Asia.
4Q22 results testament to high growth at cloud business
4Q22 earnings are a testament to Samsung SDS’ rapidly growing cloud business. Cloud generated revenue of KRW341.8bn (+9.4%QoQ, +39.0%YoY) with standout growth at CSP (KRW124.1bn; +9% QoQ, +39% YoY) and MSP (KRW143.5bn; +28% QoQ, +115% YoY). MSP is enjoying momentum from infrastructure conversions and corporate SW’s cloud recovery projects; the company expects MSP to remain as the main growth driver (37% 2021-23E CAGR). CSP revenue should continue to grow this year as Dongtan data center operations gain steam.
Dividends exceed expectations
Dividends may increase. Samsung SDS announced FY22 EPS of KRW3,200 (vs. KB estimate of KRW2,700), in accordance to its FY22-24 dividend guideline (30% of EPS). We note that FY20-21 payout (~30% of EPS) was above the guideline (25%).