Galaxy S21 Sales Strong
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
SEC’s 1Q21 OP should exceed consensus on rising demand at the IM and CE divisions. Memory prices, which should pick up in earnest from 2Q21, are expected to contribute to healthy annual earnings growth. However, with competitors narrowing their memory technology gap, a potential decline in SEC’s leadership role in the memory arena poses a risk factor.
Enjoying strong Galaxy S21 sales
We maintain a Buy rating and TP of W110,000 on Samsung Electronics (SEC). For 1Q21, the firm is likely to report sales of W59.3tn (-4% q-q) and OP of W8.8tn (-2% q-q). Despite off-seasonality, OP should outstrip consensus thanks to robust earnings at the IM and CE divisions. By division, OP is estimated at W3.5tn for the semicon division (-10% q-q), W0.4tn for display (-78% q-q), W3.8tn for IM (+58% q-q), and W1.0tn for CE (+17% q-q).
Backed by improved supply-demand conditions, DRAM price growth should make a favorable contribution to earnings at the semicon division. On the other hand, earnings are to be negatively impacted by the shutdown of SEC’s Austin fab (US) due to an extreme cold wave. At the display division, margins decline is likely due to an increase in the proportion of rigid OLED sales versus flexible OLED sales. At the IM division, earnings should improve significantly thanks to robust Galaxy S21 sales. We estimate 1Q21 Galaxy S21 sales at 11mn units. In line with growing ‘contactless’ demand from consumers amid Covid-19, sales of home appliances such as TVs have remained solid, driving continued earnings improvement at the CE domain.
Memory prices to climb in earnest from 2Q21
Memory price growth, which is expected to take off in earnest from 2Q21, should positively impact SEC’s 2021 earnings. We forecast company-wide 2021 OP of W49.0tn (+36% y-y). In 2Q21, shipments of server products using Intel’s next-generation Whitley platform should kick off alongside a likely acceleration in data center investment by hyperscalers.
Amid an ongoing rise in contactless demand, the trend towards one PC per person is spreading. We expect PC demand to remain strong until end-2021 and predict 2021 PC sales growth of 10% y-y. As a potential risk factor, we note that the technology gap between SEC and competitors is narrowing on delays in the development of 1αnm DRAM and 176-layer 3D NAND.