Meritz Raises Samsung Electronics Target to $362, Sees Q2 Operating Profit Above $65 Billion

"Samsung Electronics Seen Posting More Than $65 Billion in Second-Quarter Operating Profit Even After Bonus Charges; Target Price Raised" — Meritz

Meritz Securities said on July 6 that Samsung Electronics likely posted more than 90 trillion won ($65.2 billion) in second-quarter operating profit even after reflecting bonus provisions, and raised its target price to 500,000 won ($362) from 420,000 won. It maintained its buy rating.

The brokerage estimated Samsung Electronics posted 90.1 trillion won ($65.3 billion) in operating profit for the quarter. That is well above the 75 trillion won to 84 trillion won range projected by other brokerages.

Expectations for Samsung Electronics' second-quarter earnings had recently cooled because the company needed to reflect provisions for special management performance bonuses. Even so, Meritz still projected operating profit above 90 trillion won after incorporating 19.3 trillion won ($14 billion) in bonus provisions.

Kim Sun-woo, an analyst at Meritz Securities, wrote that the memory chip division's operating profit would reach 112 trillion won ($81.1 billion) before those provisions are reflected. The LSI and foundry divisions, however, are set to post an operating loss of more than 2 trillion won ($1.45 billion) as utilization expands.

Meritz said Samsung Electronics' strong earnings should continue through the rest of the year, assuming memory chip selling prices keep rising through year-end. Kim said a severe supply shortage in the memory chip market, driven by a lack of clean rooms, will deepen through the end of next year and that the cycle still appears far from its midpoint.

He also said recent objections to structurally higher chip prices amount to "the outcry of a coachman looking at internal combustion-engine cars." In an era of first-come, first-served competition to invest in AGI, adapting to a redistribution of supply will be unavoidable, he added.

Han Gyeong-woo, Hankyung.com reporter, case@hankyung.com