Big debut: Samsung profit rides on S6 model,
Samsung models debuting Friday, especially pricier S6 Edge, will help restore electronics giant’s margins, analysts predict
SEOUL— Samsung Electronics’ S6 smartphones debuting Friday are raising analyst expectations for the first profit gain in six quarters as the company battles Apple for leadership in the global mobile market.
Operating income will jump to more than eight trillion won ($9 billion Canadian) in the three months ending June, the first gain since 2013, according to estimates from IBK Securities and HMC Investment Securities. After first-quarter earnings released Tuesday beat expectations, five other analysts said they also planned to raise profit projections.
Samsung is counting on new de- signs to lure users willing to pay more for the latest features and win back customers from Apple, which chose Friday to start selling its first smartwatch. The Galaxy S6 models, including a more expensive version with a multi-sided display, will help restore margins battered by competition with lower-cost makers in China and India, said Lee Seung Woo, an analyst at IBK.
“Samsung will make a killing from a significant rise in margins from the pricier S6 Edge,” said Lee. “Profit at its mobile business may nearly double in the second quarter.”
Buzz about the S6 has helped fuel a rally in Samsung shares, adding about $20 billion to the company’s market value since March 1, when the phones were unveiled.
The stock rose 1.2 per cent to 1,479,000 won at the close of trade in Seoul, bringing its gain since Sam- sung unveiled the phones on March1 to 9 per cent.
The company’s margin is likely to benefit as the proportion of high-end smartphones in its sale mix rises above 30 per cent, Sundeep Bajikar, an analyst at Jefferies Group LLC, said in a note.
Samsung didn’t provide net income or details of divisional earnings. Audited results are scheduled for later this month.
Samsung’s second-quarter operating income will probably be 7.5 trillion won, based on the average of six analyst estimates compiled by Bloomberg since Tuesday’s earnings. The company had profit of 7.2 trillion won in the year earlier.
“We are going back to a time where Samsung’s strong sales of smartphones will help boost profits at its component businesses,” said Greg Roh, a Seoul-based analyst at HMC Investment. “Second-quarter results will be a lot higher, largely helped by S6 smartphones.”
Roh expects Samsung to ship a combined 50.3 million units of the S6 and S6 Edge by year end.
Samsung will make the main chip in the next iPhone model, regaining a customer previously lost to Taiwan Semiconductor Manufacturing, people with direct knowledge of the matter said this month.
“Market excitement over the S6 Edge model seems a lot louder than the flat model and it’s questionable if Samsung can make enough curved displays to meet high demand,” said Claire Kyung Min Kim, a Seoulbased analyst at Daishin Securities Co. “The Edge device will further widen its gap with other Android phone makers.”