Too Much Inclined

Samsung Electronics and SK Hynix accounted for more than 25 percent of the total KOSPI market capitalization on September 25.
Samsung Electronics and SK Hynix accounted for more than 25 percent of the total KOSPI market capitalization on September 25.

 

Samsung Electronics and SK Hynix are expected to record their best-ever results for four consecutive quarters. Accordingly, their stock prices are also reaching a record high.

According to financial information provider FnGuide on October 10, more than three securities companies expect that Samsung Electronics and SK Hynix will post 14.34 trillion won (US$12.63 billion) and 3.83 trillion won (US$3.37 billion) in operating profit in the third quarter, respectively.

Samsung Electronics, which has renewed its record-high results from the fourth quarter last year, is expected to increase its operating profit by 175.7 percent in the third quarter compared to a year earlier, recording a significant growth. While most securities firms predict that the company’s operating profit will go up by about 3 percent from 14.07 trillion won (US$12.39 billion) at the previous quarter, Eugene Investment & Securities and Kiwoom Investment said the figure can reach up to 15 trillion won (US$13.22 billion). When the current trend continues, Samsung Electronics will settle down as a member of “10 Trillion Won of Quarterly Operating Profit Club” following the second quarter and easily accomplish an annual operating profit of 50 trillion won (US$44.05 billion).

Kim Woon-ho, an analyst at IBK Investment & Securities, said, “As the rate of increasing supply of memory chips, such as DRAM and NAND, has slowed and more demands are generated than expected, their prices are rapidly rising. Sales of flexible organic light emitting diode (FOLED) will grow in earnest from the fourth quarter so the display sector will show a significant improvement in performance.” He also said that such trend will continue until next year and suggested the target stock price of 3.5 million won (US$3,084), which was the highest proposed by securities firms.

SK Hynix, which is now in a super boom cycle of the memory chip business along with Samsung Electronics, is also expected to record a 427 percent higher operating profit compared to the same period last year. The company, which has maintained a solid growth rate, seems to post more than 4 trillion won (US$3.52 billion) in operating profit in the fourth quarter and up to 13 trillion won (US$11.45 billion) annually.

SK Hynix will continue to record a remarkable ratio of operating profit to the net sales. The company recorded 45.6 percent of the rate of operating profits in the second quarter, which was the highest among major conglomerates listed on the stock market. It is expected to post a higher operating profit rate at 48.2 percent this quarter. In short, the company will take about half of 7.94 trillion won (US$7 billion) of sales in the third quarter as profits.

Choi Do-yeon, an analyst at Shinhan Investment who raised the company’s target stock price to 107,000 won (US$94), said, “This year’s and next year’s performance estimates have been revised to reflect a better flow of supply and demand of memory chips than expected. The current stock price fails to reflect the stable sales of DRAM and the growth potential of NAND unlike the past.”

The two companies, which are also recording the highest stock prices, accounted for more than 25 percent of the total KOSPI market capitalization. On September 25 when the stock price of Samsung Electronics and SK Hynix reached a record high at 2,684,000 won (US$2,365) and 86,300 won (US$76), the combined market capitalization of the two companies took up 26.5 percent of the entire Kospi index. The share of the two companies’ market capitalization went up by a whopping 10 percent points in a short period time from 15.5 percent two years ago.

 

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