Strong smartphone business expected to help Samsung overtake Intel in operating profit


Samsung Electronics, Asia’s biggest technology company, is set to post a record profit on strong sales of smartphones, brokerages said Monday.

Local securities houses said Samsung is expected to solidify its global market position as a leading provider of smartphones and tablet computers, both of which are enjoying stronger sales worldwide.

Daewoo Securities said Samsung’s revenue and operating profit this year would reach 183 trillion won ($154.7 billion) and 21 trillion won, respectively, breaking its previous records. Daewoo analyst Song Jong-ho said the projected operating profit is equivalent to $18.3 billion, which is bigger than U.S. software giant Intel’s estimated operating income of $17.7 billion.

“While the overall PC industry based on Intel’s microprocessors is forecast to grow by 5 to 10 percent this year, Samsung’s new flagship business of smartphones will see a faster growth,” Song said, putting out a “buy” recommendation and setting the target price at 1.3 million won.

Last year, Samsung competed with U.S.-based Apple on an equal footing by releasing a series of Android-based Galaxy smartphone and tablet computers. The successful launch of such smart devices helped Samsung post 164.7 trillion won in revenue, the biggest amount in its history, according to its projection released on Jan. 6. Samsung’s 2011 operating profit is expected to reach 16.1 trillion won, the second-highest level after its 2010 earnings.

Other analysts also agreed that Samsung’s operating income would surpass 20 trillion won this year on the strength of its smartphone and other value added component business.

Song Myung-sup, analyst at Hi Investment & Securities, said Samsung’s operating income would stand at 20.7 trillion won this year. He predicted that Samsung’s smartphone shipments, which logged 100 million units in 2011, would jump to 160 million units this year.

Song maintained a “buy” recommendation for Samsung and raised the target price from 1.15 million won to 1.25 million won.

But Samsung is not completely free from the economic headwinds stemming from the eurozone fiscal crisis and greater concerns about the slower growth of the world economy. Tong Yang Securities, for instance, said Samsung’s first-quarter operating profit would slow down 20 percent on-quarter to 4.14 trillion won, as the semiconductor, display and telecommunications sectors are expected to stay stagnant.

Tong Yang said Samsung’s earnings would begin to rise from the second quarter, but the uncertainties plaguing the broader economy might keep the technology behemoth from sprinting forward at a faster pace.

Analysts here said Samsung’s stock was still undervalued compared with its foreign peers due to the domestic regulatory restrictions that prevent local institutional investors from increasing their holdings of the firm beyond a certain level. Samsung’s market capitalization is 150 trillion won, the biggest on the KOSPI stock market.

By Yang Sung-jin
(insight@heraldcorp.com)