JP Morgan lowers Samsung Electronics' earnings estimates

By Kim Young-gyo HONG KONG, Sept. 16 (Yonhap) -- Global investment bank JP Morgan said Friday it has lowered its earnings forecasts for Samsung Electronics Co. for 2011 and 2012 as global component industries continue to face excess inventory. Samsung Electronics, the world's leading memory chip and TV maker, has seen a weaker profit this year due to plunging prices of its mainstay memory chips and liquid-crystal display (LCD) panels on sluggish demand. The company posted a net income of 3.51 trillion won (US$3.14 billion), representing an 18-percent decrease on-year. JP Morgan revised its forecast on the manufacturer's net income from 12.85 trillion won to 12 trillion won for this year, and from 14.82 trillion won to 14.65 trillion won for next year. "We marginally lowered our earnings estimates for 2011 and 2012," the investment banks said in a report. The bank attributed the cuts in estimates mainly to a decline of earnings in Samsung's component business, which covers memory chips and display panels. "We believe due to oversupply in both Dynamic Random Access Memory (DRAM) and LCD, its component division is likely to record a meaningful earnings decline in the third quarter and the trend is likely to continue into the fourth quarter," JP Morgan said. A meaningful recovery in those industries is unlikely to happen unless a substantial recovery in the global economy takes off. Contrary to the increasing optimism in the market, the investment bank said DRAM prices are not likely to bottom out in the near future, citing the high inventory in the channel and at major PC original equipment manufacturers. The expected loss in the component business, however, will be partially offset by the stronger earnings in the finished product business, it said. "In the midst of severe competition in the smartphone market, we believe Samsung Electronics continues to surprise on the upside in the handset business on the back of its strong product line-up along with the Galaxy series, and lack of new products from Apple due to the transition to a new model," the bank said, expecting the company will see a strong volume growth in the third quarter of 2011.