Silently Climbing to the Top... Will Samsung Electronics Become the World's Most Profitable Company? [Why&Next]

Securities Industry Continues to Raise Samsung Electronics’ Operating Profit Forecasts for Next Year
Morgan Stanley Projects 631 Trillion Won
Samsung Electronics Poised to Become the World’s Top Company by Operating Profit Next Year

Yonhap News Agency

There is a growing outlook that Samsung Electronics will surpass global giants such as Nvidia, Alphabet (Google), Apple, Amazon, and TSMC to become the world's top company in operating profit next year. If this prediction comes true, it will mark the first time a Korean company has ever become the highest-earning company in the world, attracting significant market attention.

Securities Industry Continues to Raise Samsung Electronics’ Operating Profit Estimates for Next Year

According to the financial investment industry on April 27, global investment bank Morgan Stanley recently raised its operating profit forecast for Samsung Electronics for next year from the previous 367 trillion won to 631 trillion won. The figure of 631 trillion won is the highest estimate among all domestic and international securities firms.

Morgan Stanley expects that the advancement of the artificial intelligence (AI) industry will lead to a sharp increase in memory demand over the long term, benefiting both Samsung Electronics and SK hynix. Accordingly, it also raised its operating profit forecast for SK hynix next year from 298 trillion won to 408 trillion won.

Morgan Stanley was previously known as the so-called “grim reaper of the memory semiconductor sector,” releasing a report in 2024 that predicted “winter is coming” for the memory semiconductor market, triggering a sharp drop in the stock prices of Samsung Electronics and SK hynix. Now, just two years later, the firm, once the biggest pessimist, has turned into the most optimistic voice.

After Samsung Electronics and SK hynix announced first-quarter results that exceeded market expectations this year, not only Morgan Stanley but also other domestic and global securities firms began raising their earnings forecasts for both companies one after another.

Among foreign firms, Macquarie projected next year’s operating profit for Samsung Electronics and SK hynix at 477 trillion won and 447 trillion won, respectively. JP Morgan forecast SK hynix's operating profit for next year at 344 trillion won.

Compared to their foreign counterparts, many domestic securities firms remain more conservative in their earnings forecasts. According to FnGuide, the consensus estimate for Samsung Electronics’ operating profit next year among domestic securities firms that published reports in the past month is 389 trillion won, while SK hynix’s is 302 trillion won.

Among domestic securities firms, KB Securities has been the most aggressive in raising its forecasts. KB Securities now projects Samsung Electronics’ operating profit for this year and next year at 327 trillion won and 488 trillion won, respectively—up 49% and 62% from its previous estimates.

Kim Dongwon, Head of Research at KB Securities, noted, “Not only did memory semiconductor prices exceed expectations in the first quarter, but the upward trend is expected to strengthen further in the second quarter and into the second half of the year,” adding, “Accordingly, Samsung Electronics’ operating profit will enter a full-fledged acceleration phase from the first quarter of this year.”

In particular, Kim predicts that if Samsung Electronics achieves operating profit of 488 trillion won next year as expected, it will become the number one company in the world by operating profit. Nvidia is expected to rank second with an estimated operating profit of 485 trillion won. SK hynix is projected to be third, with KB Securities forecasting its operating profit for next year at 358 trillion won. Aramco is expected to rank fourth (323 trillion won), followed by Microsoft (283 trillion won), Alphabet (282 trillion won), Apple (248 trillion won), and Amazon (183 trillion won).

Sharp Profit Growth Expected to Strengthen Shareholder Returns

With profit forecasts being significantly raised, expectations are also growing for policies aimed at enhancing shareholder returns. Samsung Electronics has announced plans to allocate 50% of its free cash flow (FCF) to shareholder returns over the three years from 2024 to 2026. FCF refers to the cash remaining after deducting capital expenditures or M&A costs from money earned through business operations.

In the securities industry, there is speculation that the rapid improvement in Samsung Electronics’ earnings could lead to a special year-end dividend as cash reserves accumulate. Mirae Asset Securities expects that, based on FCF projected to reach 60 trillion won this year, Samsung Electronics’ annual dividend per share could increase to around 8,110 won. Hana Securities projects a figure of 8,135 trillion won.

Macquarie Securities previously analyzed in February that “Samsung Electronics may carry out a special dividend of around 100 trillion won at the end of the year.” The company’s annual total dividend payout typically hovers around 10 trillion won, with dividends per share of about 1,500 to 1,600 won. According to Macquarie’s analysis, the special dividend alone could exceed 15,000 won per share in arithmetic terms. If Samsung Electronics’ profits next year surpass 600 trillion won as some securities firms predict, next year’s dividend could increase even further.

This content was produced with the assistance of AI translation services.