Samsung’s Q2 operating profit could reach 8 trillion won

Samsung Electronics could post close to 8 trillion won ($6.8 billion) in operating profit for the second quarter on buoyant sales of high-margin smartphones led by the flagship Galaxy S7 and a reduction in costs, according to analysts. That is almost 20 percent more than the earnings surprise of 6.68 trillion won in the first quarter.

The tech giant is scheduled to release a second-quarter earnings result guidance on July 7, three weeks before it releases confirmed data.

The average operating profit forecast for the April-June period by 24 brokerage houses was 7.27 trillion won, according to securities information provider WISEfn on Tuesday, a figure that has steadily risen over the past three months.

The Tuesday figure is up 8.2 percent from the 6.72 trillion won projected a month earlier and up 27.9 percent from the 5.68 trillion won forecast three months earlier.

Some industry insiders are anticipating even more sanguine figures of between 7.7 trillion won and 7.8 trillion won.

Yuanta Securities went so far as to predict 8 trillion won in operating profit for the second quarter and adjusted its target share price for Samsung Electronics to 1.7 million won from its previous 1.57 million won.

“Samsung’s less-than-expected spending on marketing in the Information Technology & Mobile Communication [IM] division [responsible for smartphones] seems to have bolstered its profitability,” said Lee Jae-yoon, an analyst at Yuanta. “After competing smartphone brands both at home and in the United States have shown sluggish performances and its smartphone product lineup has been increasingly simplified, the operating margin at Samsung’s IM division has been rising consistently.”

The Galaxy S7 and its Edge model, released in March, are estimated to have sold over 27 million units so far, up to nine million more than their predecessor, the S6 series, in the same period of time.

Analysts say the IM division is expected to register an operating profit of more than 4 trillion won in the second quarter, its largest in two years.

Analyst Lee also mentioned a relatively upbeat sales of large, high-end TVs and premium consumer electronics products such as air conditioners and refrigerators as having a positive impact on the outlook for second-quarter earnings at the nation’s most valuable company.

Britain’s vote to leave the European Union last Friday is expected to be an unexpected boon for Samsung’s second-quarter profit. The Korean won, which closed at 1,150.2 to the U.S. dollar last Thursday, slumped to as low as 1,179.9 the following day, the referendum date, and ended at 1,160.2 on Wednesday. Export-reliant Samsung already saved some 300 billion won in the first three months of the year thanks to the weakened won against the U.S. dollar and euro.

On the back of such upbeat prospects, shares of Samsung Electronics hit highs for the year between June 17 and June 21, and the price briefly hit 1.5 million won during June 22 trading, although it closed at 1,445,000 won.

Brokerage houses scrambled to revise target prices for Samsung shares. Daishin Securities raised its target to 1.71 million won, while Korea Investment & Securities came up with 1.7 million won and Hanwha Investment & Securities with 1.8 million won.

“Samsung Electronics has yet again become a hot potato in the stock market,” said Kim Young-il, an analyst at Daishin Securities. “Its leadership has been reignited, even though additional surges may not be plausible within a short time span.”

BY SEO JI-EUN [seo.jieun@joongang.co.kr]