Amid a worldwide recall of its latest Galaxy Note 7 smartphone, Samsung Electronics on Friday predicted 7.8 trillion won in operating profit for its third-quarter business period, a 5.5 percent increase compared to last year.

The 3Q earning guidance released by the South Korean tech giant beat analysts’ estimate, an average of 7.4 trillion won, according to FN Guide, a local fund tracker.

The better-than-expected estimate appears to have been supported by the strong sales of NAND flash memory chips and displays, analysts said.

When compared with the previous quarter, Samsung’s 3Q operating profit is estimated to drop 4.18 percent, it said in a regulatory filing.

Revenue was also down 5.19 percent on-year to 49 trillion won.

Industry sources say the earnings figure is deemed to be pretty robust considering Samsung may have spent more than 1 trillion won to cover up the costs for the still ongoing global recall program.

The number of Note phones sold during the period is estimated at about 3 million units, which compared to the previous target figure of 6 million units.

Samsung started recalling the products last month following reports of battery explosions.

Despite the recall, Samsung may have been saved by a rebound in memory chips for personal computers and OLED display panels for smartphones, according to market watchers.

Buoyed by the higher-than-expected earnings estimates, the firm’s shares on Friday also soared to 1,706,000 won, a 0.89 percent increase from a day before. Samsung shares have been surging on expectation of governance restructuring proposed by a US hedge fund Elliott Management.

The activist investor urged Samsung Electronics to split into a holding company and list its operating company on the Nasdaq stock exchange to raise shareholder value and to open a door for the new leadership.

Samsung provides its own earnings estimates each quarter to investors. The final announcement is scheduled to be made later this month.

The company didn’t offer a breakdown of profits in each business division.

According to analyst estimates, the flagship mobile business division is expected to see about 2 trillion won in operating profit, as compared to 4.32 trillion won in the second quarter.

That for the semiconductor business division is estimated to stand at about 3 trillion won while the display and home appliance division is expected to have earned a combined 1.5 trillion won in operating profit.

By Cho Chung-un and Kim Young-won
(christory@heraldcorp.com) (wone0102@heraldcorp.com)