Samsung Electronics Cuts Target Price to 300,000 Won... Citigroup Cites Union Strike Risks and Earnings Pressure

\r\n
[The Financial News] Global investment bank Citigroup Inc. has lowered its target price for Samsung Electronics Co., Ltd., reflecting risks from the company’s labor union’s general strike.
Citigroup said the key reason for the downgrade was that a stronger strike could require a large bonus provision, making short-term earnings pressure unavoidable.
According to the financial investment industry on the 4th, Citigroup recently cut its target price for Samsung Electronics Co., Ltd. from 320,000 won to 300,000 won in a report.
Citigroup identified the recent labor-management conflict as the biggest risk facing Samsung Electronics Co., Ltd. It said that if the strike intensifies, the company would have no choice but to set aside a large bonus provision. Based on that view, Citigroup lowered its operating profit estimates for Samsung Electronics Co., Ltd. for this year and next year by 10% and 11%, respectively, from previous forecasts.
Other major risk factors cited for Samsung Electronics Co., Ltd. included delays in mass production of High Bandwidth Memory (HBM) for key customers, increased investment by competitors, and the possibility of greater earnings volatility if the won strengthens and foreign exchange effects shift.
Still, Citigroup remained positive on Samsung Electronics Co., Ltd.'s fundamentals and maintained its "Buy" rating. Even compared with the lowered target price of 300,000 won, the current share price of 220,500 won still implies more than 30% upside.
Peter Lee, a Citigroup researcher, said, "Customers are already placing advance orders for next year's volumes," and added, "Given lead-time constraints at new fabs and limited supply growth, the memory shortage will deepen further next year."
hsg@fnnews.com Han Seung-gon Reporter