SAMSUNG_ELECTRONICS(005930.KS)OW：TIME_FOR_COMPONENTS_TO_TURN_AROUND-2012-10-30.ppt

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1、,(%),FlashnoteTelecoms,Media&TechnologySemiconductorsEquity KoreaOverweightTarget price(KRW)1,900,000Share price(KRW)1,287,000Forecast dividend yield 0.4Potential return(%)48.1Note:Potential return equals the percentagedifference between the current share price andthe target price,abcGlobal Research

2、Samsung Electronics(005930 KS)OW:Time for components to turn around Another record high 3Q earnings driven by strong Galaxy S3sales and AMOLED,but DRAM and TV were weaker Turnaround in components;NAND,system LSI and LCD tolead sequential growth.,PerformanceAbsolute(%)Relative(%),1M-2.90.0,3M9.81.7,1

3、2M37.835.6,Reiterate OW and maintain target price of KRW1.9mn,an AsiaSuper Ten portfolio stock,Index,KOSPI INDEX,RICBloombergMarket cap(USDm)Market cap(KRWb)Enterprise value(KRWb)Free float(%),005930.KS005930 KS176,417194,73016296375,AMOLED and handset OP were above,while TV margin slipped.Samsung r

4、eleaseddetailed 3Q results with sales at KRW52trn(up 10%q-o-q,up 26%y-o-y),and OP atKRW8.1trn(up 21%q-o-q,up 91%y-o-y).1)AMOLED earnings were far higher due tofaster new capacity ramp-up,2)handset OP was 3%higher due to steeper ASP increase from,Note:(V)=volatile(please see disclosure appendix)29 Oc

5、tober 2012Ricky Seo*AnalystThe Hongkong and Shanghai BankingCorporation Limited,Seoul SecuritiesBranch+822 3706 Yeon Lee*AssociateThe Hongkong and Shanghai BankingCorporation Limited,Seoul SecuritiesBranch+822 3706 View HSBC Global Research at:http:/*Employed by a non-US affiliate ofHSBC Securities(

6、USA)Inc,and is notregistered/qualified pursuant to FINRAregulations,more premium phone sales,but 3)TV margin depressed slightly due to aggressive promotionand firm panel price.Smartphone shipment reached 59mn units(up 23%q-o-q),andAMOLED margin improved to 25%from 18%in 2Q,we estimate.Turnaround in

7、components;NAND,system LSI and LCD to lead sequential growth.We are assuming 4Q12 OP to reach KRW8.4trn(up 3%q-o-q),9%above consensus and2013 OP to reach KRW34.6trn(up 19%y-o-y),7%above consensus.Cyclicals will turnaround due to capex discipline.1)NAND price should increase until 1Q13 and strong tre

8、ndwill continue next year.PC DRAM price will stabilize from November and mobile DRAMshould offset the negative impact from the sluggish PC DRAM price trend.2)System LSIwill show strong growth with massive AP orders from two key customers amid newproduct launches.3)LCD margin will improve further to

9、8%from 6%in 3Q along withpanel price stabilization and cost reduction.Guided increasing marketing costs in handset,but we think,profitability will be partiallydefended through 1)greater premium smartphone sales such as Galaxy Note 2 and 32GBNAND density LTE phones,2)leverage from internal component

10、sourcing and 3)decreasingsales contribution of lower margin feature phones.We forecast 66mn smartphone shipment(up 12%q-o-q)in 4Q.In mid term,high-end smartphone momentum will continue as LTE,Issuer ofreport:,The Hongkong andShanghai BankingCorporation Limited,SeoulSecurities Branch,service launch g

11、lobally next year.LTE penetration will reach near 20%of total smartphone in2013 from 10%in 2012,and Samsung will take market share of above 40%.,Disclaimer&DisclosuresThis report must be readwith the disclosures andthe analyst certifications inthe Disclosure appendix,and with the Disclaimer,which fo

12、rms part of it,Reiterate OW and maintain TP of KRW1.9mn,an Asia Super 10 stock.Factoring in bettermid/longer-term outlook on cyclicals,we upgrade earnings slightly.We believe SamsungElectronics earnings will show sequential growth until 2014.Our TP is based on targetmultiple of 1.9x 2013e PB,factori

13、ng in longer-term growth.The stock currently trades at 1.3x2013e PB versus its historical average of 2.2x.Samsung is one of the most undervalued stockamong leading IT companies.,Samsung Electronics(005930 KS)Semiconductors29 October 2012Key takeaways from earnings conference1)Handset/smartphone Outl

14、ook:Given that 4Q is peak season,smartphone demand will increase substantially,butcompetition will intensify along with competitors various new product launch.The company guidedincreasing marketing cost which may deteriorate margins slightly.However,due to steady sales ofGalaxy S3 and launch of Gala

15、xy Note 2,company expects better earnings in 4Q.LTE could be a keygrowth driver of the smartphone market,and Samsung will maintain leadership.Review:Strong Galaxy S3 sales,which exceeded 20mn units,led the strong earnings in 3Q whiletablet PC sales were stronger than 2Q with Galaxy Note 10.1”launch.

16、2)Semiconductor-DRAM Outlook:Mobile DRAM demand will continue to grow due to new product launches and strongseasonality.Meanwhile,visibility for PC DRAM will be weak and PC shipment will also be slow asimpact from the new Windows 8 launch remains uncertain.Overall supply/demand balance mayimprove al

17、ong with additional production cut from other DRAM makers,but impact will not besignificant.Review:Mobile DRAM sales continued to grow supported by strong demand from Chinesesmartphone makers.PC DRAM was weak due to the weaker than expected back to school demand.-NAND Outlook:NAND demand will likely

18、 be strong from year-end peak season and new mobile launches.Along with solid demand,supply growth will also be limited as NAND makers retain their supplyconstraint strategy,leading prices to trend upward.Review:Major product launches and positive impact from the Chinese holidays mainly supportedove

19、rall earnings growth.-System LSI Outlook:Samsung expects to generate solid earnings growth by supplying mobile AP to premiumsmartphone products.Review:Mobile AP supply increase to premium high function smartphones led overall earningsgrowth.CMOS sensors and foundry earnings were relatively weak q-o-

20、q.3)Display Outlook:Demand for TV panels will likely increase along with year-end seasonality,Chinese LunarNew Year holiday demand and Chinese subsidy program.IT panels will also continue solid growthtrend supported by new product launches and intensified competition.Notebook/monitor panels,onthe ot

21、her hand,will be sluggish due to low seasonality.2,abc,Samsung Electronics(005930 KS)Semiconductors29 October 2012 Review:TV panel demand increased as sales were positive during the Chinese holidays and demandcontinued to grow in preparation for the year-end peak season.New tablet product launches a

22、lsopushed up demand for IT panels.Notebook and monitor panels were weak due to uncertainties overthe Windows 8 launch.4)Consumer Electronics Outlook:Samsung Electronics will focus on generating sales growth from emerging markets whilesecuring profitability in developed markets through expanding larg

23、e size TVs of over 60 inches.Review:Earnings weakened due to slow demand in the developed market and weak seasonality forair conditioners.Samsung Electronics:3Q earnings review,abc,(KRWbn),Actual,HSBC,Diff.Consensus,Diff.,2Q12,q-o-q,3Q11,y-o-y,SalesOP,52,1778,124,52,0008,100,0%0%,51,8887,684,1%6%,47

24、,5976,720,10%21%,41,2744,253,26%91%,OPM,16%,16%,15%,14%,10%,Source:Company data,Bloomberg,HSBC estimatesSamsung Electronics:3Q earnings review,(KRWbn)SalesSemiconductorMemoryDisplayLCDCommunicationHandset,Actual52,1778,7215,2238,4625,40929,92426,251,HSBC52,0009,0365,3168,6655,81527,74024,073,Differe

25、nce0%-3%-2%-2%-7%8%9%,CE,VD,11,9828,231,12,0908,510,-1%-3%,OPSemiconductorDisplayCommunicationCEOPMSemiconductorDisplayCommunicationCE,8,1241,1511,0925,62543116%13%13%19%4%,8,1001,1409405,48652216%13%11%20%4%,0%1%16%3%-17%,Source:Company data,HSBC estimates3,(KRWbn),Samsung Electronics(005930 KS)Sem

26、iconductors29 October 2012Samsung Electronics:Changes in earnings by division_ New _ _Previous _ _ Difference _2012e 2013e 2014e 2012e 2013e 2014e 2012e 2013e 2014e,abc,RevenueDRAMNANDSystem LSILCDAMOLEDTelecomCEOPDRAMNANDSystem LSILCDAMOLEDTelecomCE,200,61912,0589,18214,13922,94511,181109,13646,972

27、29,1002,0151,1461,2679792,35919,5811,976,216,82012,93911,54619,69421,38513,156121,81243,28734,6012,7142,0272,7301,4872,56621,6841,392,231,75513,37811,83723,55021,21817,134123,95848,68135,8992,5731,9133,7851,0912,72821,8981,910,201,14711,7669,38114,52823,62510,783105,36347,81629,0101,9421,1791,305795

28、2,10319,4142,304,224,94412,32911,83920,44522,48113,208118,34748,29534,0352,8062,3402,8346012,62921,3941,431,234,98912,59311,60024,44720,62616,550116,03153,14135,2232,9842,2063,9301082,84720,5712,578,0%2%-2%-3%-3%4%4%-2%0%4%-3%-3%23%12%1%-14%,-4%5%-2%-4%-5%0%3%-10%2%-3%-13%-4%148%-2%1%-3%,-1%6%2%-4%3

29、%4%7%-8%2%-14%-13%-4%911%-4%6%-26%,OPMDRAMNANDSystem LSILCDAMOLEDTelecomCE,15%17%12%9%4%21%18%4%,16%21%18%14%7%20%18%3%,15%19%16%16%5%16%18%4%,13%22%14%9%2%17%17%3%,14%23%18%14%0%14%18%2%,14%23%13%15%0%16%17%5%,Source:Company data,HSBC estimatesSamsung Electronics:Quarterly earnings trend,(KRWbn)Rev

30、enueDRAMNANDSystem LSILCDAMOLEDTelecomCEOPDRAMNANDSystem LSILCDAMOLEDTelecomCEOPMDRAMNANDSystem LSILCDAMOLEDTelecomCE,1Q1245,2712,8592,0343,0886,1782,36223,22010,6705,850412186162(101)4014,27048013%14%9%5%-2%17%18%4%,2Q1247,5973,1972,2233,1805,6302,62024,04112,1506,7206042003022884624,19076014%19%9%

31、10%5%18%17%6%,3Q1252,1772,9792,2453,4985,4093,05329,92411,9828,1245362933223307625,62543116%18%13%9%6%25%19%4%,4Q12e55,5743,0232,6814,3735,7293,14631,95112,1708,4054634664814627345,49530515%15%17%11%8%23%17%3%,1Q13e50,4733,0552,7624,1545,0733,00628,62010,3048,2235505524993496275,30034816%18%20%12%7%

32、21%19%3%,2Q13e52,4533,1952,8544,6535,1953,02529,35810,6728,8296905216513676035,63336417%22%18%14%7%20%19%3%,3Q13e55,7663,3933,0085,5835,3373,44131,28310,7218,9207934978374107015,42126016%23%17%15%8%20%17%2%,4Q13e58,1293,2972,9235,3045,7803,68432,55111,5918,6286824587433616355,33042115%21%16%14%6%17%

33、16%4%,2011165,00212,6299,50111,00623,0496,62255,54058,91116,2502,8482,0151,506(1,628)9028,2671,41510%23%21%14%-7%14%15%2%,2012e200,61912,0589,18214,13922,94511,181109,13646,97229,1002,0151,1461,2679792,35919,5811,97615%17%12%9%4%21%18%4%,2013e216,82012,93911,54619,69421,38513,156121,81243,28734,6012

34、,7142,0272,7301,4872,56621,6841,39216%21%18%14%7%20%18%3%,Source:Company data,HSBC estimates4,Samsung Electronics(005930 KS)Semiconductors29 October 2012Samsung Electronics:Quarterly earnings trend,abc,(KRWbn)Total salesDevice SolutionSemiconductorDRAMNANDSystem LSITFT-LCDAMOLEDDMCCommunicationHands

35、etCEDigital MediaAppliance,1Q1245,27116,5207,9802,8592,0343,0888,5402,36233,89023,22018,90410,67010,8452,957,2Q1247,59716,8508,6003,1972,2233,1808,2502,62036,19124,04120,52112,15011,8293,570,3Q1252,17717,4038,7212,9792,2453,4988,4623,05341,90529,92426,25111,98211,1863,371,4Q12e55,57418,95210,0783,02

36、32,6814,3738,8753,14644,12131,95127,89512,17011,4083,278,1Q13e50,47318,0509,9713,0552,7624,1548,0793,00638,92328,62024,96910,30410,2413,027,2Q13e52,45318,92310,7023,1952,8544,6538,2213,02540,03029,35825,80710,67210,3023,391,3Q13e55,76620,76211,9843,3933,0085,5838,7783,44142,00431,28327,54010,72110,0

37、893,424,4Q13e58,12920,98711,5243,2972,9235,3049,4633,68444,14232,55128,60411,59110,5923,493,2011165,00266,67137,00112,6299,50111,00629,6706,622114,45055,54050,83058,91146,22012,691,2012e200,61969,72535,37912,0589,18214,13934,12611,181156,108109,13693,57146,97245,26713,175,2013e216,82078,72144,18012,

38、93911,54619,69434,54113,156165,099121,812106,92143,28741,22513,335,2014e231,75587,11648,76513,37811,83723,55038,35217,134172,639123,958109,68648,68145,45014,730,Sales breakdown,Device SolutionSemiconductorDRAMNANDSystem LSITFT-LCDAMOLEDDMCCommunicationHandsetCEDigital MediaApplianceOperating profit(

39、K-IFRS)Device SolutionSemiconductorDRAMNANDSystem LSITFT-LCDAMOLEDDMCCommunicationHandsetCEDigital MediaApplianceOPM trendDevice SolutionSemiconductorDRAMNANDSystem LSITFT-LCDAMOLEDDMCCommunicationHandsetCEDigital MediaAppliance,3618647195755142242475,8501,0607604121861623004014,7704,2703,8164804800

40、136101495417141820440,3518757176765143262586,7201,8561,1066042003027504624,9504,1904,13276065310714111319910918141720663,3317647166805750232168,1242,2901,1515362933221,0927625,8805,6255,43843141417161313181391325141921441,3418558166795750222168,4052,6051,4104634664811,1957345,8005,4955,2513052881615

41、14141517111323131719331,3620658166775749202068,2232,5761,6005505524999766275,6475,3005,040348333151614161820121221151920331,3620659166765649202068,8292,8321,8626905216519706035,9975,6335,410364347171715172218141220151921331,37216510166755649191868,9203,2392,1277934978371,1117015,6825,4215,1832602431

42、71616182317151320141719221,3620659166765649201868,6282,8781,8826824587439966355,7505,3305,113421386351514162116141117131618441,40228671846934313628816,2506,6107,3362,8482,0151,506(726)9029,6818,2677,8771,4151,244170101020232114(2)1481515231,35186571767854472323729,1007,8114,4272,0151,1461,2673,3382,

43、35921,40019,58118,6381,9761,835140151113171291021141820441,36206591667656492019634,60111,5257,4712,7142,0272,7304,0532,56623,07621,68420,7471,3921,308841615172118141220141819331,382165101777453472120635,89912,0908,2722,5731,9133,7853,8192,72823,80821,89821,0931,9101,836741514171916161016141819441,So

44、urce:Company data,HSBC estimates5,Samsung Electronics(005930 KS)Semiconductors29 October 2012Samsung Electronics:Key assumptions,abc,1Q12,2Q12,3Q12,4Q12e,1Q13e,2Q13e,3Q13e,4Q13e,2011,2012e,2013e,DRAMShipment(Mpcs/Q,1Gb eq)Bit growth(%)ASP(USD,1Gb eq)q-o-q,y-o-y%OP margin(%),2,39531.1(8)14,2,61691.11

45、19,2,72441.0(9)18,3,053120.9(5)15,3,14130.9118,3,28550.9022,3,59690.9(3)23,3,79960.8(8)21,8,231511.4(47)23,10,788311.0(28)17,13,821280.9(10)21,NAND,Shipment(Mpcs/Q,8Gb eq)Bit growth(%)ASP(USD,8Gb eq)q-o-q,y-o-y%OP margin(%)TFT-LCDMid/Large size panel(mn units)q-o-q,y-o-y%Mid/Large size panel ASP(USD

46、)q-o-q,y-o-y%OP margin(%)HandsetShipment(mn units)q-o-q,y-o-y%ASP(USD)q-o-q,y-o-y%OP margin(%)Smartphone(mn units)q-o-q,y-o-y%ASP(USD)q-o-q,y-o-y%Tablet PC(mn units)q-o-q,y-o-y%ASP(USD)q-o-q,y-o-y%,1,711(0)1.1(10)9472125(3)(2)93(3)15617204419290(3)2(26)4308,2,272330.8(19)9481112(10)5941164520489281(

47、3)325421(2),2,544120.8(8)1347(0)112(0)6104111941821592329034604210,3,036190.85175171120811391982196612287(1)638400(5),3,21760.802048(5)109(3)7106(6)202220672281(2)3(45)380(5),3,536100.8(6)18504109(0)71092202021728270(4)433361(5),4,051150.7(8)175131101812111194(4)198010259(4)40350(3),4,42390.6(11)165

48、34110061329184(5)189418225(13)525340(3),6,196791.4(36)211775124(16)(7)33019122251598312323(10)7347414(31),9,563540.9(38)121939115(7)4405231734220217121287(11)14109411(1),15,227590.7(16)182035110(5)74681518991931344256(11)1614355(14),Source:HSBC estimates,Samsung Electronics:PE band chart,Samsung Ele

49、ctronics:PB band chart,1,600,0001,200,000800,000400,0000,(KRW),1,600,0001,200,000800,000400,0000,(KRW),Jul-04SECx 10.1,Jul-06,Jul-08x 15.2x 7.5,Jul-10,Jul-12x 12.6x 4.9,Jul-04SECx 1.6,Jul-06,Jul-08x 2.4x 1.2,Jul-10,Jul-12x 2.0 x 0.9,6,Source:HSBC,Source:HSBC,Samsung Electronics(005930 KS)Semiconduct

50、ors,abc,29 October 2012Valuation and risksWe reiterate our Overweight rating on SEC and target price of KRW1,900,000.Our TP is based on anunchanged reference multiple of 1.9x 2013e PB,factoring in longer-term growth.The stock currently trades at1.3x 2013e PB versus its historical average of 2.2x.Und