Samsung Q2 17 – Just chipper
A truly mighty performance from Samsung puts it well on track to promoted to being the largest semiconductor company in the world by revenues this year
Samsung heading for No. 1. A truly mighty performance from Samsung puts it well on track to promoted to being the largest semiconductor company in the world by revenues this year.
Samsung has reported preliminary results for Q2 17 with revenues / EBIT expected at KRW 60tn / KRW 14tn nicely ahead of consensus of KRW 58.4tn / KRW 13.0tn respectively.
As always with Samsung, the market has already taken into account the discrepancy between published expectations and the real figures, resulting in no meaning movement in the shares after the announcement. Despite the recovery of the handset business following the Note 7 disaster, these results are primarily driven by semiconductors where Samsung is extending its dominance while its competitors flounder. The difficulties that Toshiba is going through and the uncertainty surrounding the future of its flash memory business has certainly done Samsung no harm so far this year. This combined with a rapid move away from magnetic hard drives to solid state storage has meant that demand has been so strong that both volumes are growing very quickly and price declines have slowed.
Around 50% (if not more) of EBIT has been derived from the semiconductor business while the handset business has remained solid but much more pedestrian. The outlook remains very strong as the smartphone market is seeing a temporary blip in growth while the trend towards solid state storage looks set to continue for some time to come. Consequently, it looks pretty certain that the next two quarters are likely to see Samsung post two more record levels of profit and cash generation.
However, this has been widely flagged already and with the shares at KRW2.4m, the valuation argument for holding a big position it not nearly as great as it was. Consequently, we remain pretty ambivalent to Samsung, preferring Tencent, Baidu and Microsoft.
Disclaimer - Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This document may contain materials from third parties, which are supplied by companies that are not affiliated with Edison Investment Research. Edison Investment Research has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of publication and is subject to change without notice. While based on sources believed reliable, we do not represent this material as accurate or complete. Any views or opinions expressed may not reflect those of the firm as a whole. Edison Investment Research does not engage in investment banking, market making or asset management activities of any securities. The material has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.