Samsung Elec's income projected to be second highest and sales best for Q3

South Korea’s bellwether stock Samsung Electronics Co. is expected to deliver best quarterly sales and income close to its peak during the 2017-2018 super cycle in the third quarter.

According to consensus complied by Korean financial data tracker FnGuide, Samsung Electronics is projected to have earned 15.68 trillion won ($13.3 billion) in operating income over sales of 73.12 trillion won for the third quarter ending Sept. 30.

The results would be 24.8 percent and 14.9 percent, respectively, higher from the previous quarter, and 27.5 percent and 10.8 percent up from a year ago.

Samsung Electronics reports third-quarter earnings guidance next week.

The third-quarter income would come closer to quarterly average operating profit of 15.3 trillion won the chip giant recorded during the 2017-2018 chip super cycle. Its operating income hit a historic high of 17.57 trillion won in the third quarter 2018.

Eugene Investment & Securities in a report published on Sept. 17 forecast Samsung Electronics to end the July-September period with sales topping 70 trillion won for the first time ever and operating income at its second highest.

The earnings outlook has drawn back investors to the bellwether stock.

Offshore investors who had dumped Samsung Electronics shares until the end of August have reversed their position to net purchase 1.3 trillion won worth from Sept. 1 to 23. The last time they were net buyers in Samsung Electronics was in November last year.

Samsung Electronics shares have rebounded as result. On Monday, the shares rose 0.5 percent to end at 77,700 won apiece. They peaked at 96,800 won, based on intraday trading, on Jan. 15 but lost steam since then to fall to as low as 72,500 won on Aug. 20. The stock has been boxed at around 77,000 won since Sept. 17.

The third-quarter performance has been better than expected due to foundry order.

Samsung Electronics has been receiving overwhelming foundry orders and may raise contract price by 15 to 20 percent for the first time since it spun off the consignment division in 2017.

Top foundry player Taiwanese rival TSMC already announced to increase contract price by up to 20 percent.

The brisk sales of foundry business have significantly improved Samsung Electronics’s non-memory chip business. According to KB Securities, its foundry division’s operating income would hit 700 billion won in the third quarter and average at 1 trillion won per quarter next year. The business delivered around 200 billion won in the second quarter this year.

Smartphone business also would have benefited from the success of the latest foldable series – Galaxy Z Fold 3 and Galaxy Z Flip 3. The company sold 920,000 units of the new foldable phones during pre-order period from Sept. 17 to 23. That is far above market’s estimated 800,000 units and 11 times higher than what the predecessor Galaxy Z Fold 2’s pre-order recorded.

But its outlook beyond the third quarter is foggy amid signs of early fizzling out in the latest chip boom phase.

Prices of DRAM chips, behind half of Samsung Electronics’ operating income, are expected to fall up to 8 percent in the fourth quarter.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]