SEOUL, Apr 17: Top investment houses including Goldman Sachs have cut their 2006 net profit estimates for Samsung Electronics, citing weak first-quarter results, but most see an earnings recovery by the second half.
The slew of downgrades came after Samsung Electronics, the world's biggest maker of memory chips, posted on Friday a bigger-than-expected 25 percent slump in quarterly operating profit, hit by sliding margins in mobile phones and memory chips.
Goldman Sachs lowered Samsung's 2006 net profit forecast by 12 percent to 7.9 trillion won (.28 billion), for an earnings-per-share (EPS) of 52,857 won. The investment house also cut Samsung's 2007 net profit estimate by 7 percent to 9.8 trillion won, for an EPS of 65,980 won.
Goldman lowered the chip maker's share price target to 791,000 won from 823,000 won, while maintaining the stock at ''outperform/neutral.'' Other top brokerages also cut their forecasts.
Deutsche Bank lowered the chip maker's 2006 EPS forecast by 5 percent to 50,256 won, while UBS lowered its estimate by 3 percent to 63,514 won and Lehman Brothers by 1 percent to 45,096 won.
All three brokerages maintained the stocks at ''buy'' or ''overweight.'' The brokerages were broadly optimistic about an earnings turnaround starting in the second quarter, with Goldman seeing a full recovery by the second half, led by a recovery in prices of NAND flash memory chips and liquid crystal display panels.
UBS was the only brokerage in the group to raise Samsung's 2007 EPS, by 4 percent to 76,899 won, citing its increased confidence that profitability in the memory chip sector would offset a squeeze in LCD and handset margins.
However, Macquarie Securities issued a more cautious note, adding it did not see a significant margin recovery by the second half. It forecast price declines in major products would continue past the second quarter.
Macquarie lowered Samsung's 2006 net profit estimates by 8.6 percent to 7.6 trillion won and its 2007 forecast by 2.9 percent to 7.9 trillion won, while maintaining the stock at ''neutral''.