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Samsung Electronics: 2Q21 earnings to improve, led by semiconductors

We maintain a Buy rating and TP of W95,000 on Samsung Electronics (SEC), expecting 2Q21 sales of W60.4tn (-5% q-q) and OP of W11.4tn (+21% q-q). By division, we forecast OP of W6.1tn (+80% q-q) for semiconductor, W1.1tn (+201% q-q) for display, W3.1tn (-29% q-q) for IM, and W0.8tn (-25% q-q) for CE. For 2Q21, earnings are to be led by semiconductors. We forecast 2Q21 DRAM and NAND ASP rise of 13% q-q and 2% q-q, respectively, and expect DRAM shipments to grow 9% q-q on full-fledged server investment.

In 2Q21, the IM domain has been negatively affected by the spread of Covid-19 in India and Vietnam. For 2Q21, smartphone shipments are projected to reach 60mn units (-20% q-q). At the display division, losses from the LCD business should narrow amid an ongoing sharp rise in LCD panel prices. And, OLED earnings should improve on the reflection of one-off gains related to customer utilization.

Expect slowdown in semicon supply and demand improvement in 2H21

Recently attracting strong attention from investors, the 3Q21 DRAM contract price is likely to rise only 8% q-q, coming in somewhat below the 10% increase expected by some market participants. Currently, there is disagreement about the direction of memory prices between buyers and suppliers. We note that Chinese smartphone makers have lowered their shipment targets for 2021 due to the spread of Covid-19.

Notebook PC shipments, which have driven IT demand since 2H20, have recently peaked out. In contrast, however, server demand remains healthy. North American hyperscalers cut investment from 3Q20 to 1Q21, and current server memory inventory levels are low and data center utilization is increasing. New server demand is expected to pick up from 2Q21 and continue into 4Q21. Businesskorea

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