Samsung sees a flurry of stock-target cuts on growth concerns

[SEOUL] Samsung Electronics' price target was cut by about half a dozen analysts including those at HSBC Holdings this week, as China's power crisis is seen worsening supply chain disruptions and weighing on the company's profits. Shares slumped to their lowest since December.

The persistent supply chain bottlenecks, which stemmed from the spread of the coronavirus in South-east Asia and now from China's limited electricity supply, will likely undermine the memory chip industry during the fourth quarter, Choi Do-Yeon, an analyst at Shinhan Investment, wrote in a report Tuesday. Choi cut Samsung's target by 4,000 won (S$4.51) to 96,000 won while maintaining a buy rating.

Analysts at KB Securities, Eugene Investment & Securities, HI Investment & Securities and Ebest Investment & Securities also reduced their targets, with Ebest's 8 per cent reduction being the biggest. The moves follow cuts by HSBC and Mirae Asset Securities on Monday.

Samsung's shares plunged as much as 3.5 per cent amid a broad selloff in Asia's tech sector as South Korea markets reopened after a holiday. The nation's largest stock has lost about 15 per cent so far this year, compared with the benchmark Kospi's gain of nearly 1.5 per cent.

Still, Samsung's consensus 12-month price target of 98,944 won based on contributions from 36 analysts implies a potential return about 43 per cent from current levels, data compiled by Bloomberg show.

"Given risks of growth slowdown in China and the US, and also the downward trends in memory chip prices, profit growth will slow until the first half of next year," said Lee Seung-Woo, an analyst at Eugene Investment, who lowered 2022 annual profit forecast by 11 per cent. "However, unless the circumstances deteriorate to an extreme, profit will enter a cycle of rebound during the later half of next year."

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