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Analysis of Samsung Electronics Co.

Analysis of Samsung Electronics Co.

13 October 2021

Samsung Electronics is the world’s largest consumer electronics manufacturer. The company was founded in 1938 and went public in 1992. It is the world’s largest manufacturer of televisions, smartphones, memory chips, and various electronics such as lithium-ion batteries, semiconductors, image sensors, etc. Electronics brings 70% of the company’s revenue. Samsung Group generates 17% of all South Korea’s revenue.

The company has very high free cash flow and low debt. However, Samsung spends money mainly on dividends. Also in 2017 and 2018 there was a buyback.

Multipliers:
P / E forward 9.69
P / S 1.8
EV / EBITDA 5.45
Debt 16.73 trillion won with operating cash flow of 64.55 trillion
Promotion Price: 69,000 won

Samsung shares continue to fall throughout the current year starting from 88.8 thousand won to the current 69 thousand. The decline was 15%, while the entire Korean market is up 1.5%. 36 analysts are bidding an average price of 98,944 won, 43% higher than current prices, and all have a Buy rating. Simply Wall Street gives an estimate of 114928 won.
Profits are also expected to grow 10.6%, while the industry is expected to grow 9.9%. EPS is expected to grow steadily over the next two years.

The company pays dividends generously – the current payout ratio is 63%. They pay 50% of FCF. For example, dividends in the third quarter of this year were simply not announced. But the market is waiting for the final payment for the year. However, there is no stable increase in payments.

The chart is trading below the 20, 50 and 200-day averages. The last time such a price for Samsung was in April 2020. Since the support line at 72,000 has been broken, the stock may go even lower, but the price is good now. The first target is around 74000-76000, the second is around 81000.

Conclusion: Now the price includes the risks of a slowdown in the growth of China and the United States, as well as the trend of falling world prices for memory chips. But sooner or later, demand will return, Samsung is not going anywhere anyway. A year ago, the company was 13% cheaper than it is today, but at the same time earned 32 trillion won. So the current price doesn’t look fair.

13 October 2021
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