Samsung Electronics: Profiting from Better Pricing and Staying Off Big Politics

Samsung Electronics (SSNLF, 005930.KS) reported preliminary Q1 results on Thursday, surprising investors with record quarterly revenues and its highest Q1 profit since 2018.

South Korea's biggest chaebol reported operating profit having jumped 50% YoY to 14.1 trillion won (~$11.6 billion), well above the consensus estimate of 13.5 trillion won, on 18% higher sales to a record 77 trillion won, topping expectations of 74.9 trillion won.

Samsung’s performance speaks to how the prolonged microchip shortage continues to boost business for tech suppliers. But sales of the South Korean tech giant’s memory chips and smartphones could face risks of decline in the months ahead as factors including geopolitical escalation and record inflation could dent consumer sentiment.

Nevertheless, many prominent analysts, such as Citigroup's Peter Lee, expect solid earnings growth in 2022 on the back of healthy earnings rebound in semiconductor and display in 2H 2022. Samsung's memory business will benefit from the memory pricing strength throughout 2H 2022. The company will provide net income and divisional performance when it reports full earnings on April 28.

Risks: Samsung is the largest smartphone vendor in Russia with a 30% market share as of Q4 2021, and last month it said it suspended shipments of all its products to the country.