Third quarter sales of 195 trillion won and operating profit of 107.4 trillion won... Record-high performance for four consecutive quarters
Foreign selling focuses on ETF rebalancing and option expiration... Increased stock price volatility on earnings release date
Samsung Electronics (005930) recorded an operating profit of 107.4 trillion won in the third quarter of this year, becoming the first Korean company to record a quarterly operating profit of 100 trillion won. Sales reached 195 trillion won, breaking record highs in both sales and operating profit for four consecutive quarters since the fourth quarter of last year.
While increased demand for semiconductors due to increased investment in artificial intelligence (AI) has boosted performance, short-term supply and demand burdens such as foreign selling and exchange-traded fund (ETF) rebalancing are being highlighted in the stock market.
Quarterly operating profit exceeds KRW 100 trillion for the first time... 2.5 times last year's annual profit
Samsung Electronics' provisional sales for the third quarter on a consolidated basis were KRW 195 trillion and operating profit was KRW 107.4 trillion. This is an increase of 126.59% and 782.50%, respectively, compared to the same period last year. Compared to the previous quarter, sales increased by 13.70% and operating profit increased by 20.01%.
In particular, the operating profit earned over three months is approximately 2.5 times the annual operating profit of 43.6 trillion won last year. After exceeding KRW 90 trillion in quarterly sales and KRW 20 trillion in operating profit for the first time in the fourth quarter of last year, in less than a year, sales approached KRW 200 trillion and operating profit exceeded KRW 100 trillion.
Profitability improvement was also notable. The operating profit margin in the third quarter was 55.1%, higher than the previous quarter. According to SK Securities researchers Han Dong-hee and Son Geon, sales were 2.8% lower than the market consensus of 201 trillion won, but operating profit exceeded the expected 107 trillion won by 0.7%. Operating profit margin was also 1.9 percentage points higher than market expectations.
This performance is analyzed as a result of increased demand for AI server memory, including high-bandwidth memory (HBM), and increased DRAM prices, leading to improved profitability. However, since the provisional performance does not include performance by business division, the exact profit size of the Device Solutions (DS) division, which is responsible for the semiconductor business, can be confirmed in the final performance announcement.
Cumulative sales for the first to third quarters of this year amounted to 500.37 trillion won and operating profit reached 254.13 trillion won. Depending on the fourth quarter performance, annual sales and operating profit are also expected to set new records.
KOSPI retreats to 6800 mark due to foreign selling… Stock price weak despite earnings announcement
Contrary to the improvement in performance, foreign selling has recently continued in the domestic stock market. On the 7th, a day before the announcement of Samsung Electronics' provisional results, KOSPI closed trading at 6803.90, down 1.98% from the previous trading day.
Foreign Investors net sold more than 2.6 trillion won in the KOSPI market on this day. Samsung Electronics and SK Hynix also fell 1.29% and 2.82%, respectively, putting pressure on the index.
Selling of Samsung Electronics by foreign investors has become more noticeable recently. According to Goldman Sachs, foreign investors net sold about $2.6 billion worth of Samsung Electronics stocks over the past five trading days. Even in a situation where expectations for improvement in the semiconductor industry are high, it is interpreted that sales continued due to profit taking and portfolio adjustment.
Samsung Electronics was pushed back to 267,000 won at one point in the early trading on the 8th. Even on the day when record-high performance was announced, stock prices were weak as foreign and program trading dominated selling. However, as trading directions can change during the day, it is difficult to determine short-term stock price movements as the market's evaluation of performance.
Rising U.S. Treasury yields are also putting pressure on investor sentiment. Last night, the U.S. 10-year Treasury bond yield exceeded 5.36% during the day, but then decreased the increase. Samsung Electronics' stock price movement today is being influenced by the large-scale supply and demand adjustment planned in the domestic stock market along with the burden of external interest rates.
Semiconductor ETF 19 trillion won rebalancing... Samsung Electronics estimated to be for sale at 200 billion won
On the 8th, the date of Samsung Electronics' earnings announcement, seven types of semiconductor ETFs worth about 19 trillion won will begin regular rebalancing. As the proportion of Samsung Electronics included in some products exceeds the upper limit for each stock, it is expected that sell orders will be issued to lower the proportion.
For example, the proportion of Samsung Electronics included in the TIGER Semiconductor TOP10 ETF was 27.1% as of the 29th of last month, exceeding the upper limit of 25% per stock. Samsung Securities estimated that approximately 200 billion won worth of Samsung Electronics stocks could be put up for sale during this proportion adjustment process.
On the other hand, it is expected that purchase demand for SK Hynix and SK Square will be approximately 90 billion won and 80 billion won, respectively. This means that rather than funds flowing out of the semiconductor industry as a whole, there may be a movement of funds within the ETF due to adjustments in the weighting of each stock.
In a report on the 6th, Goldman Sachs also warned of the possibility of increased volatility in Samsung Electronics' stock price on the 8th. This is because the mechanical selling due to ETF rebalancing, option expiration, and the end of share buybacks overlap at the same time.
The 15 trillion won share buyback that Samsung Electronics has been promoting has also entered the final stage. As of the 6th, the purchase progress rate reached 97%, so the demand for treasury stock purchases, which has supported the stock price, is expected to decrease.
However, not all estimated sales due to ETF rebalancing are actually sold. As the weighting of each stock is adjusted and foreign investors and institutions buy and sell at the same time, the actual impact on the stock price may vary depending on intraday supply and demand.
With this performance, Samsung Electronics once again confirmed the improvement of the semiconductor industry and increased profitability. In the stock market, more attention is being paid to the timing of foreign selling calming down and the flow of funds after the ETF weighting is adjusted, rather than immediate performance. Whether the buying trend in large-cap semiconductor stocks will continue even after the short-term supply and demand burden is resolved is expected to be a key indicator of future KOSPI trends.
