2Q21 OP Forecast at KRW11.3tr (+20.6% QoQ)
The author is an analyst of Shinhan Investment Corp. He can be reached at doyeon@shinhan.com. -- Ed.
2Q21 OP forecast at KRW11.3tr (+20.6% QoQ)
We now expect Samsung Electronics to post operating profit of KRW11.3tr (+20.6% QoQ) on sales of KRW62.0tr (-5.1% QoQ) for 2Q21, topping the FnGuide consensus of KRW10.3tr by a wide margin. Key drivers of earnings improvement include rising DRAM and NAND prices, recovery of non-memory chip shipments on fully-resumed operations at the Austin fab, and solid demand for tech products. One-off gains from displays should also add to the growth in earnings.
By division, we forecast operating profit at KRW6.33tr (+87.9% QoQ) from semiconductors, KRW3.27tr (-25.64% QoQ) from IT & mobile communications (IM), KRW0.67tr (+86.1% QoQ) from displays, and KRW1.05tr (-6.1% QoQ) from consumer electronics (CE).
2H21 OP to reach KRW29.5tr (+42.6% HoH)
Earnings are set to visibly improve in 2H21 vs. 1H21. The up-cycle in memory chips should lead to price hikes exceeding market expectations in 2H21.
For full-year 2021, we project sales at KRW268.0tr (+13.2% YoY) and operating profit at KRW50.2tr (+39.5% YoY). By division, we forecast operating profit at KRW29.8tr (+58.2% YoY) from semiconductors, KRW13.0tr (+13.1% YoY) from IM, KRW3.5tr (+57.0% YoY) from displays, and KRW3.8tr (+8.0% YoY) from CE.
Non-memory supply shortages that negatively affected tech demand in 1H21 are expected to ease from end-2Q21,with fabs that were temporarily shut down (including Samsung's Austin fab) resuming operations. Meanwhile, server demand has shifted to a steep uptrend from2Q21and will likely add to mobile and PC demand for memory chips going forward.
Recommend accumulating shares in global memory market leader
Share performances of memory makers hinge mainly on YoY changes in company earnings, which tend to benefit from relatively stronger base effect in 3Q and 4Q vs. 2Q. We thus expect Samsung Electronics shares to confirm bottom in 2Q21 and rally sharply in 3Q21 and 4Q21.
Investor confidence toward the memory up-cycle should strengthen as non-memory shortages start to ease from 1H21 peak levels and server chip demand continues upward from 2Q21. In light of growing positives, we recommend actively accumulating shares in Samsung Electronics.