Quarterly OP to Return to KRW10tn Level in 2Q21
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Maintain BUY and target price of KRW105,000; 2021E Semiconductor OP to increase approx. KRW10tn YoY
We maintain BUY and our 12m TP of KRW105,000 for SEC based on the following: (1) Starting in 2Q21, the components business (DS/DP) should see earnings improve with an upturn in DRAM ASP, better supply-demand dynamics for NAND and an increase in utilization rate for OLED. (2) So far this year, the set business (IM/CE) is seeing demand recover faster than expected.
We expect quarterly OP to return to the KRW10tn level for the first time in 2Q21 since reaching KRW12.4tn in 3Q20. For 2021, Semiconductor OP (58% of SEC 2021E OP) should jump 53% YoY, or approx. KRW10tn, reaching KRW28.7tn on the back of an upturn in DRAM prices stemming from supply shortages.
OP forecast: KRW8.6tn in 1Q21→ KRW10tn level in 2Q21
We forecast 1Q21 revenue/OP at KRW62.8tn/KRW8.6tn with an across-the-board slump (excl. IM) in earnings. However, OP should slightly beat the market consensus of KRW8.47tn. Defying Memory earnings improvements (DRAM/NAND), Semiconductor should see earnings slide QoQ thanks to a decline in System LSI resulting from cost increases in the early phase of operations at a new foundry as well as the suspension of operations at the Austin, Texas, factory. On the other hand, IM and CE should rack up solid earnings, with the former aided by a 21% QoQ rise in smartphone shipments to an estimated 74mn units (on the back of the Galaxy S21) and the latter driven by brisk QLED TV sales. In terms of 1Q21 OP by division, we see Semiconductor at KRW3.5tn, DP at KRW0.6tn, IM at KRW3.7tn and CE at KRW0.7tn.
2021 forecast: OP at KRW49.5tn (+38% YoY)
For 2021, we estimate OP to advance by KRW13.5tn (+38% YoY), reaching KRW49.5tn with Semiconductor alone contributing approx. KRW10tn (DRAM/NAND/System LSI at KRW8.3tn/ KRW1.1tn/KRW0.5tn). In terms of OP by division, we estimate Semiconductor at KRW28.7tn (+53%), IM at KRW13.4tn (+17%), DP at KRW3.6tn (+61%) and CE at KRW3.2tn (-12% YoY). For 2Q21, we estimate the server DRAM price to jump 10-15% QoQ (e.g., 32GB DRAM up maximum 20%), with North American data-center companies ramping up servers and demand for cloud migration rising. For NAND, we expect ASP declines to significantly ease from 2Q21 and an ASP upturn in 3Q21 on the back of rising demand for client SSD (associated with stronger-than-expected PC demand from March), as well as an increase in orders for enterprise SSD.