Samsung Electronics’ Q2 Operating Profits Projected to Dip below 15 Tril. Won

As Samsung Electronics’ flagship smartphone Galaxy S9 shows lower sales than expected, concerns over performance in the second quarter are growing. Some even say that the company’s operating profits will drop below 15 trillion won (US$13.91 billion) again for the first time since the first half of last year.

Samsung Electronics shares closed at 49,400 won (US$45.83), down 1 percent, or 500 won (US$0.46), from the previous trading day on the benchmark KOSPI market on June 12. The price dropped to 49,250 won (US$45.69) during the mid-day trading on the same day, hitting a record low after being relisted on May 4 following the stock split. Institutional investors net sold 420.6 billion won (US$390.17 million) worth of Samsung Electronics shares until the 12th from the beginning of this month, dragging down the stock price. On the other hand, individual investors net bought 475 billion won (US$440.63 million) worth of Samsung Electronics shares.

Concerns over poor performance in the second quarter are having a negative effect on the price of Samsung Electronics shares. Korea Investment & Securities Co. said on the 12th that Samsung Electronics will see its operating profits dip below 15 trillion won (US$13.91 billion) for the first time after the second quarter last year. Yoo Jong-woo, an analyst at Korea Investment & Securities, said, “Samsung Electronics’ operating profits in the second quarter are expected to drop about 6 percent to 14.7 trillion won (US$13.64 billion) compared to the previous quarter. Its sales will also show a 5 percent decrease to 57.6 trillion won (US$53.4 billion).” Eugene Investment & Securities Co. and KTB Investment & Securities Co. also released a report about Samsung Electronics’ lower earnings outlook on the 11th, while eBEST Investment & Securities Co. lowered Samsung Electronics’ target stock price to 68,000 won (US$63.08) for the first time after the stock split.

Slow business in the Information Technology & Mobile Communications (IM) division, including smartphones, is considered a major cause of Samsung Electronics’ poorer performance. Yoo said, “As Samsung Electronics adjusted its smartphone lineups in order to strengthen its competitiveness in low-end models, the company was expected to show a fall in smartphone sales this year. However, the sales of its high-end model, the Galaxy S9, are also flat in the second quarter. The company’s operating profits in the IM division are forecast to stand at 2.3 trillion won (US$2.13 billion) in the second quarter, down 38 percent from the previous quarter and 21 percent from earlier expectations. In addition, Samsung Electronics’ IM division is expected to fail to show recovery in performance in the second half of the year.

However, Samsung Electronics’ key semiconductor division is forecast to continue to show improvement in performance so the company’s operating profits will be able to surpass 15 trillion won (US$13.91 billion) in the second half of the year. Korea Investment & Securities forecasted that Samsung Electronics operating profits in the third and the fourth quarter will come to 16.1 trillion won (US$14.94 billion) and 15.8 trillion won (US$14.66 billion), respectively. Yoo said, “Samsung Electronics’ smartphone business will continue to be slow in the second half of the year but the company is expected to recover performance thanks to the increase in seasonal profits in the organic light emitting diode (OLED) sector and stable profits in the semiconductor sector.”