Samsung Electronics posts record quarterly sales with rosy outlook

Solid mobile business, weaker won drive tech giant's record Q1 sales

By Park Jae-hyuk

Samsung Electronics announced Thursday that its first-quarter sales are estimated to have hit a record high with a better-than-expected operating profit, despite multiple difficulties from unfavorable factors here and overseas.

In its earnings guidance, the tech firm estimated that its sales, based on International Financial Reporting Standards (IFRS), rose 17.76 percent year-on-year to 77 trillion won ($63 billion) during the first quarter of this year, while operating profit surged 50.32 percent from a year earlier to 14.1 trillion won.

Samsung Electronics said it will announce details of the performance of each business division during a conference call on April 28.

The tech giant's first-quarter performance beat market consensus among domestic securities analysts who forecast 75.2 trillion won in sales and 13 trillion won in operating profit, according to financial information provider FnGuide.

Their estimates were partially attributed to the electronics industry's tendency to post lower earnings during the first quarter than in other quarters.

They have also mentioned additional difficulties Samsung Electronics has been confronting, such as the controversy over its “game optimizing service” (GOS) app that automatically throttles the performance of smartphones to prevent overheating, and the global supply chain crisis caused by Russia's invasion of Ukraine, as well as the ongoing COVID-19 pandemic.

After the announcement of the earnings guidance, analysts cited the global popularity of Galaxy S22 smartphones released earlier this year and the higher-than-expected international price of DRAM chips as reasons for the earnings surprise.

The weakening Korean won against the U.S. dollar also contributed to the better-than-expected performance, they said.

“Unlike previous expectations that sales of both DRAM and NAND Flash would decrease during the first quarter, sales of DRAM remained steady and sales of NAND Flash rose 3 percent,” Hyundai Motor Securities analyst Roh Geun-chang said. “The decline of smartphone sales in Russia and Ukraine seems to have been offset by sales in other regions.”

DB Financial Investment analyst Eo Kyu-jin expected Samsung Electronics to post record annual earnings this year, saying that the prices of NAND Flash and DRAM will bounce back during the second and the third quarters, respectively.

Citigroup analyst Peter Lee also said in a note ahead of the results that Samsung Electronics will show solid profit growth this year on the back of healthy earnings rebounds in semiconductors and displays during the second quarter, anticipating its memory business to benefit from strong chip prices that are expected throughout the second quarter.

Amid the increasing uncertainties over the global economy, however, Samsung Electronics' stock price closed at a 52-week low of 68,000 won on Thursday, down 0.73 percent from the previous session.

Although most analysts have remained optimistic about the improvement in Samsung Electronics' earnings, they have differed on the possibility of its stock price rebounding.

“Because of higher-than-expected defects in the 4-nano semiconductor manufacturing process, shareholders have had to wait for improvements in the performance of the company's foundry business, and the GOS controversy damaged the credibility of Samsung and its Galaxy smartphones,” Eugene Investment & Securities analyst Lee Seung-woo said. “Intel's plan to make large investments is another negative factor.”

IBK Investment & Securities analyst Kim Woon-ho, on the other hand, expected Samsung Electronics' stock price to bounce back, based on the probable rebound of the DRAM price during the second quarter.