Analysts paint rosy outlook for Samsung, LG, SKT, KT, NHN


Korea’s information technology firms are expected to either see robust growth or get back on track in 2012.

They will continue to take a leading position in the industry by rolling out new and innovative premium electronic goods like smartphones and 3-D capable smart televisions, while local mobile carriers will move to quickly adapt to the upgraded fourth generation network technology.

Online portals are also expected to center their attention on mobile advertising and mobile messaging to widen their business portfolio for 2012.

Here are the outlooks for major Korean IT firms for this year:

Samsung Electronics

The mobile communications business at Samsung Electronics, the world’s biggest IT firm, had a great year in 2011. The company became the No. 1 smartphone maker globally, beating its rival Apple Inc., which was first to introduce the device in Korea in November 2009.

“The robust sale of Samsung’s smartphones, which was the force that pushed up its stock price in the past fourth quarter, is expected to be maintained in the first quarter of this year,” said Ahn Sung-ho, an analyst at Hanwha Securities, while forecasting that the firm will reach 21.5 trillion won in operating profit for 2012.

Noh Geun-chang, senior analyst at HMC Securities, also said that the three gadgets in the Galaxy series ― Galaxy Nexus, Galaxy Note and the Galaxy LTE ― are so hot on the market that the company is deferring the launch of the Galaxy S3.

“The partnering firms’ level of trust in Samsung’s smartphones is continuing to improve as they even worry about ‘cannibalization,’ which could be seen between their own products,” he said.

However, Daishin Securities’ analyst Kang Jung-won said the company’s System LSI and AMOLED projects are still undervalued in the market although the System LSI project itself could potentially make up to 2.5 trillion won in yearly profit.

The AMOLED business is projected to record around 1.7 trillion won in operating profit this year and the two System LSI and AMOLED businesses together are expected to be worth about 40 trillion won, he said.

Kang also said that demand for liquid-crystal display TVs is expected to grow in 2012, which will lead to a recovery in earnings for the memory and LCD units beginning in the second quarter.

For Samsung Electronics, Hanwha Securities and Daishin Securities set the stock target price at 1.32 million won and 1.35 million won, respectively, while HMC Securities suggested the firm’s target price for six months at 1.25 million won.

LG Electronics

Analysts gave a rosy outlook for LG Electronics this year with some predicting that the firm’s mobile communications business will make a comeback during the first quarter.

Song Eun-jeong, a senior analyst at E-Trade Securities, said LG’s mobile communications unit which is in charge of its smartphone portfolio, will get back into the black by March and record 152.3 billion won in yearly profit for 2012.

“LG Electronics is expected to ship about 29.82 million units of smartphones in 2012, up 47 percent from last year’s total shipment,” she said. “The low-tier smartphone market is projected to grow and this will lead to a rise in shipments for the company, especially in the latter half of this year.”

Song also said the firm’s cash cows ― the home entertainment and home appliance businesses ― will increase their percent margins this year.

“Due to premium set product lineups like 3-D television, the operating profit rate for the home entertainment unit is estimated to reach 2.2 percent, up by 0.4 percentage point from the previous year,” she said.

Song forecast that the firm will reach 57.4 trillion won in sales, an increase of 5.2 percent year-on-year and 946.3 billion won in operating profits, a 234 percent jump year-on-year, both for 2012.

Noh of HMC Securities also said that LG was gaining global market share, especially in North America and in Western Europe as its Japanese rivals such as Sony and Panasonic are facing difficulties in currency and product competitiveness.

While noting that LG has a high possibility of a turnaround in the first quarter, the high demand for its latest premium smartphones ― Optimus LTE and Prada 3.0 ― are key factors for the mobile communications business, he said.

E-Trade Korea suggested 95,000 won as the target price by six months and HMC Securities proposed 90,000 won.

SK Telecom

SK Telecom, the nation’s largest telecom carrier, is expected to maintain its market dominance this year as it has succeeded in gaining an early edge in the faster Long Term Evolution mobile network service.

SKT struggled in sales, largely driven by the government’s initiative to cut mobile fees to protect consumer rights in recent years.

With no further cut plans this year, the fast adoption of high-end smartphones will pump up the company’s slowing sales this year.

“More than 40 percent of the population use smartphones whose average revenue per user is priced at 46,000 won, far higher than 26,718 won for feature phones,” said Kim Hoe-jae, a researcher at Daishin Securities.

“In the next two years, SK Telecom is expected to grow more than 10 percent every year. It is the first time that the company has seen two-digit growth after it recorded a growth rate of 12.5 percent in 2005.”

With its recent purchase of Hynix Semiconductor, the nation’s second-largest provider of memory chips, the company has also largely removed the uncertainty factors for investors, industry watchers say.

On Dec. 14, SKT acquired a 21 percent controlling stake in Hynix Semiconductor for 3.4 billion won in its biggest-ever acquisition.

KT Corp.

With the delay of its 2G service shutdown, KT Corp., the nation’s second-largest telecom operator, could start its LTE service in January, almost six months later than SKT and LG Uplus.

Industry watchers say, however, the company will catch up with its rival companies because there would be no launch of new handsets running on the LTE service for some time to come.

“By the time Samsung Electronics releases the Galaxy S3 in the second quarter of the year, KT is expected to complete its nationwide coverage of LTE service,” Ahn Jae-min, an analyst at Kium Securities, said in a note to clients.

KT plans to complete nationwide coverage in 23 cities by March and in 84 cities by April.

With the local telecom market nearing saturation, the platform business is considered a next growth engine for telecom carriers and KT is taking the lead in the area.

The number of subscribers to KT’s IPTV and satellite TV services exceeded 5 million in December, overtaking some existing cable TV stations. With its new digital music service Genie, the company aims to nurture it into the Korean version of Apple’s iTunes.

KT also expects to grab more business opportunities in overseas markets as its opening of a global data center with Japan’s Softbank in Gimhae, South Gyeongsang Province in December.

Starting with the service for Japanese firms this year, KT plans to extend its business areas to cloud infrastructure services and computing platform and solution services.

NHN

NHN Corp., Korea’s portal giant operating Naver and Hangame, has recently named new leaders for its key businesses ― advertisement platform and online and mobile games.

NHN is nearly untouchable in the online ads market here, claiming a 70 percent share.

Industry watchers say the company’s investment into the mobile ads sector will see visible results this year, two years after the full-fledged introduction of smartphones.

“Its sales in mobile ads are expected to surge 172.6 percent from a year earlier to reach 84.6 billion won this year, driving 16.3 percent growth in the overall ads sales,” said Na Tae-yeol, an analyst at Hanwha Securities.

Even though the Korea Communications Commission in December hinted at tightening related regulations, Na said it would be difficult to implement the measures immediately.

“People’s participation in politics via the Internet has become freer than ever. The role of portal sites as the medium for communications will get bigger, especially ahead of the major elections in the coming months.”

NHN also plans to strengthen its marketing of mobile messenger Line in Korea this year, whose development has thus far been led by NHN Japan.

In Japan, subscribers exceeded 12 million recently.

Based on its positive reviews in global markets, Line is expected to accelerate the local mobile messenger market, which is currently dominated by the nation’s No. 1 mobile app KakaoTalk.

By Lee Ji-yoon and Cho Ji-hyun 
(jylee@heraldcorp.com) (sharon@heraldcorp.com)