Samsung Electronics Summary
Core Content
This document provides an update on Samsung Electronics (SEC), focusing on its earnings growth, investment ratings, and financial performance. The report highlights the company's strong performance in 2017, with expectations for continued growth through 2019, despite potential challenges in the semiconductor sector.
Main Points
- Investment Rating: The report recommends BUY for Samsung Electronics, indicating the company is expected to increase in value by 10% or more within 12 months and is highly attractive within its sector.
- Target Price: The revised target price is KRW3,100,000, which is 11% higher than the previous estimate of KRW2,800,000.
- Current Price: As of the date of the report, the current price is KRW2,738,000.
- Market Cap: The current market cap is KRW355.3t/USD314.5b.
- Share Float: The float is 129,768,494, representing 72.6% of the total shares.
- 52-Week High/Low: The 52-week high is KRW2,740,000 and the low is KRW1,539,000.
- Average Daily Trading Value (60-day): KRW581.4b/USD514.5m.
Earnings Growth
Samsung Electronics has delivered outstanding earnings year-to-date due to the semiconductor industry boom. The report forecasts continued earnings growth through 2019, driven by:
- Handset profitability: Expected to increase due to price declines in parts and the increasing adoption of AI and flexible displays.
- Semiconductor downtrend: The semiconductor division is expected to start a downtrend from 2H18, but the company is expected to avoid most of the negatives due to handset earnings growth.
- Foldable smartphones: Expected to be a game changer, similar to previous innovations like clamshell phones and Galaxy Note.
Financial Highlights
| Metric |
2016 |
2017E |
2018E |
2019E |
| Revenue (KRWb) |
201,867 |
244,012 |
265,310 |
288,624 |
| Net Profit (adj) (KRWb) |
22,726 |
41,823 |
46,892 |
48,020 |
| EPS (adj) (KRW) |
136,760 |
270,174 |
322,223 |
346,338 |
| EPS Growth (% y-y) |
24.5 |
97.6 |
19.3 |
7.5 |
| EBITDA Margin (%) |
24.7 |
32.8 |
33.8 |
32.2 |
| ROE (%) |
12.5 |
20.8 |
20.4 |
18.3 |
| P/E (adj) (x) |
20.0 |
10.1 |
8.5 |
7.9 |
| P/B (x) |
2.1 |
1.8 |
1.5 |
1.2 |
| EV/EBITDA (x) |
6.6 |
4.2 |
3.7 |
3.4 |
| Dividend Yield (%) |
1.0 |
1.1 |
1.5 |
1.6 |
Key Changes
| Metric |
New |
Old |
Diff |
| Recommendation |
BUY |
BUY |
- |
| Target Price |
3,100,000 |
2,800,000 |
+10.7% |
| 2017E EPS |
270,174 |
268,653 |
+0.6% |
| 2018E EPS |
322,223 |
329,719 |
-2.3% |
Results and Forecasts
| Segment |
1Q17 |
2Q17 |
3Q17E |
4Q17E |
1Q18E |
2Q18E |
3Q18E |
4Q18E |
2016 |
2017E |
2018E |
| Sales |
50,553 |
61,000 |
62,344 |
70,115 |
62,731 |
65,576 |
67,222 |
69,780 |
244,012 |
265,310 |
288,624 |
| Semiconductors |
15,662 |
17,580 |
20,063 |
22,020 |
21,801 |
22,105 |
21,946 |
21,842 |
76,351 |
88,694 |
92,256 |
| DRAM |
6,682 |
7,853 |
9,158 |
10,001 |
9,801 |
9,963 |
10,006 |
9,957 |
33,694 |
39,728 |
39,581 |
| NAND |
5,336 |
5,986 |
7,276 |
8,367 |
8,108 |
8,143 |
8,062 |
7,981 |
26,991 |
32,294 |
34,218 |
| LSI |
3,540 |
3,640 |
3,527 |
3,550 |
3,790 |
3,897 |
3,776 |
3,801 |
14,257 |
15,265 |
17,050 |
| Displays |
7,290 |
7,712 |
9,089 |
9,433 |
7,717 |
9,203 |
11,166 |
9,160 |
33,524 |
37,246 |
39,271 |
| OLED |
4,370 |
4,780 |
6,069 |
6,751 |
5,304 |
6,500 |
8,193 |
6,667 |
21,970 |
26,664 |
29,363 |
| Telecom |
23,502 |
30,010 |
27,108 |
28,654 |
27,386 |
27,461 |
27,208 |
29,792 |
109,274 |
111,847 |
126,804 |
| Handsets |
19,563 |
25,759 |
23,628 |
25,028 |
24,036 |
24,253 |
24,454 |
26,399 |
93,978 |
99,142 |
114,003 |
| Consumer Electronics |
10,340 |
13,070 |
13,584 |
15,558 |
12,828 |
13,807 |
14,402 |
16,486 |
52,552 |
57,523 |
61,292 |
| Operating Profit |
9,900 |
14,072 |
14,506 |
16,220 |
15,712 |
15,724 |
15,558 |
14,296 |
54,698 |
61,290 |
62,375 |
Operating Margin
| Segment |
1Q17 |
2Q17 |
3Q17E |
4Q17E |
1Q18E |
2Q18E |
3Q18E |
4Q18E |
2016 |
2017E |
2018E |
| Operating Margin (%) |
19.6 |
23.1 |
23.3 |
23.1 |
25.0 |
24.0 |
23.1 |
20.5 |
22.4 |
23.1 |
21.6 |
Major Assumptions
| Metric |
1Q17 |
2Q17 |
3Q17E |
4Q17E |
1Q18E |
2Q18E |
3Q18E |
4Q18E |
2016 |
2017E |
2018E |
| Bit Growth (%) |
(11.0) |
6.4 |
9.0 |
5.0 |
0.0 |
7.0 |
8.0 |
7.0 |
16.0 |
22.3 |
25.4 |
| ASP Change (%) |
23.0 |
12.4 |
7.0 |
4.0 |
(2.0) |
(5.0) |
(7.0) |
(7.0) |
45.5 |
(3.3) |
(20.6) |
| Margin (%) |
55.3 |
59.0 |
61.1 |
65.1 |
61.1 |
59.1 |
55.1 |
51.1 |
60.7 |
56.6 |
45.1 |
Income Statement
| Metric |
2015 |
2016 |
2017E |
2018E |
2019E |
| Sales (KRWb) |
200,653 |
201,867 |
244,012 |
265,310 |
288,624 |
| Cost of Goods Sold (KRWb) |
123,482 |
120,278 |
126,070 |
135,242 |
151,459 |
| Gross Profit (KRWb) |
77,171 |
81,589 |
117,942 |
130,068 |
137,165 |
| Gross Margin (%) |
38.5 |
40.4 |
48.3 |
49.0 |
47.5 |
| Operating Profit (KRWb) |
26,413 |
29,241 |
54,698 |
61,290 |
62,375 |
| Net Profit (adj) (KRWb) |
19,060 |
22,726 |
41,823 |
46,892 |
48,020 |
Cash Flow Statement
| Metric |
2015 |
2016 |
2017E |
2018E |
2019E |
| Cash Flow from Operations (KRWb) |
40,062 |
47,386 |
58,750 |
68,094 |
70,582 |
| Net Profit (KRWb) |
19,060 |
22,726 |
41,823 |
46,892 |
48,020 |
| Free Cash Flow (KRWb) |
14,182 |
23,243 |
18,750 |
30,094 |
33,582 |
Balance Sheet
| Metric |
2015 |
2016 |
2017E |
2018E |
2019E |
| Current Assets (KRWb) |
124,815 |
141,430 |
145,140 |
156,633 |
175,945 |
| Cash & Equivalents (KRWb) |
71,493 |
88,182 |
83,576 |
89,297 |
101,985 |
| Total Assets (KRWb) |
242,180 |
262,174 |
287,617 |
320,478 |
353,282 |
| Total Liabilities (KRWb) |
63,120 |
69,211 |
70,076 |
69,797 |
69,797 |
| Total Equity (KRWb) |
179,060 |
192,963 |
217,541 |
250,682 |
283,485 |
| Net Debt (KRWb) |
(58,619) |
(72,900) |
(68,306) |
(74,041) |
(86,744) |
Financial Ratios
| Ratio |
2015 |
2016 |
2017E |
2018E |
2019E |
| ROE (%) |
11.2 |
12.5 |
20.8 |
20.4 |
18.3 |
| ROA (%) |
8.1 |
9.0 |
15.2 |
15.4 |
14.3 |
| ROIC (%) |
17.0 |
18.1 |
31.8 |
31.3 |
28.8 |
| Payout Ratio (%) |
14.3 |
15.6 |
8.5 |
9.8 |
10.5 |
| Dividend Yield (%) |
0.8 |
1.0 |
1.1 |
1.5 |
1.6 |
Compliance Notice
- As of October 18, 2017, Samsung Securities shared group affiliation with Samsung Electronics.
- The analyst(s) did not own any shares or debt instruments convertible into shares of any company covered in the report.
- Samsung Securities' holdings of shares and debt instruments convertible into shares of each company covered would not exceed 1% of each company's outstanding shares if converted.
- The report is not intended as investment advice and should not be construed as an offer or solicitation to buy or sell any securities.
Investment Rating Overview
- BUY: Expected to increase in value by 10% or more within 12 months and is highly attractive within the sector.
- HOLD: Expected to increase or decrease in value by less than 10% within 12 months.
- SELL: Expected to decrease in value by 10% or more within 12 months.
Summary of Rating Changes
| Date |
Recommendation |
Target Price (KRW) |
| 2015/10/21 |
BUY |
1,650,000 |
| 2016/8/11 |
BUY |
1,800,000 |
| 2017/3/29 |
BUY |
2,500,000 |
| 2017/4/27 |
BUY |
2,700,000 |
| 2017/5/31 |
BUY |
2,800,000 |
| 2017/10/18 |
BUY |
3,100,000 |
Disclaimer
- This report is for information purposes only and is not intended as investment advice.
- The report does not take into account individual client circumstances.
- No representation or warranty is provided regarding the accuracy or completeness of the information.
- The report is not a recommendation for any particular securities or strategies.
- Samsung Securities disclaims all liabilities for any loss arising from the use of this report.
