Samsung to beat forecast on S6

By Kim Yoo-chul

Samsung Electronics is expected to report stronger-than-expected results in the first quarter on improvement in chips and smartphones, analysts said Monday.

They expect its operating profit to be higher than the market consensus of 5.2 trillion won.

Kyobo Securities was more upbeat than others as the brokerage expects the technology heavyweight to earn 5.72 trillion won in profits.

“Its operating profit is likely to grow 8 percent quarter-on-quarter on increased shipments of Galaxy S6 smartphones and the continued stronger demand for memory chips. A steady cut in profit losses in its logic chip division is another positive factor,” Kyobo analyst Choi Do-yeon said in a report.

Choi, however, said a stronger won may reduce its earnings, directly hurting its home appliances businesses such as display panels and televisions.

Meritz Securities expects its operating profit to reach 5.6 trillion won.

“Our 1.75 million won target on Samsung Electronics stocks hasn't been changed. Market forecast of Samsung Electronics' profit estimates was about 5.2 trillion won. However, this is too conservative. Samsung will do better and it will do much better in the second quarter,” Park Yoo-ak at Meritz said.

Stressing impressive specifications of the S6, foreign research firms also said Samsung has been on a faster track to improve its competitiveness in the smartphone industry, offsetting worries surrounding the company's phone business.

C.W. Chung at Nomura Securities pointed out that the launch of the S6 will encourage investors to more Samsung shares.

Chung said a major design overhaul of the S6 and S6 Edge was well-matched by expectations by investors and analysts.

“We revised our target price to 1.75 million won from 1.65 million won,” Chung said.

Bernstein Research and Deutsche Bank expect S6 to boost the company’s bottom line.

“For our thesis on Samsung Electronics, the S6 does not need to be a mega-success; even a further decline to 27 percent market share in the premium segment would be more than enough,” Mark Newman at Bernstein Research said.

“We believe the unveiled phone is sufficient to deliver and has the potential to beat that modest expectation. Furthermore, we think the components side of the S6 is more positive for Samsung's earnings direction with the processor moving internal (saving potentially $28 per phone), significantly more memory (DRAM and particularly NAND) and the display showing off their technology lead in flexible OLED."

Han Seung-hoon at Deutsche Bank said Samsung's strategies for diversified pricing on the S6 according to memory storage capacity like Apple will help its semiconductor division see a big divisional increase.

The S6 will be available with 32GB, 64GB and 128GB, meaning Samsung's NAND flash business division is well-positioned to benefit more.

Han said as 32GB S6 will account for 60 percent out of the total shipments by the company this year, followed by 30 percent and 10 percent with 64GB and 128GB models, this business strategy will help its handset division generate more than 10.4 trillion won operating profits, independently.