SEOUL, KOREA - ▶ After a relatively sluggish start this year, upside momentum for Samsung Electronics and Samsung Electro-Mechanics should pick up sharply on initial shipments of the Galaxy S4 in May. SEC’s share is likely to pick up in May, two months after the release of the S4, based on previous patterns following the Galaxy series launches.
▶ IT demand continues to be characterized by strong smartphone demand and weak TV and PC demand. SEC and LG Electronics are filling the void created by Apple’s slump, and this should continue until Apple releases a more competitive smartphone. Meanwhile, TV and PC demand remain soft, especially PC demand as the annual shipment forecast was cut 11% YoY in 1Q13.
▶ We forecast LCD TV sales volume around 10% YoY during the May Day sales, lower than the mid-20% growth posted in the Lunar New Year sales. Panel supply-demand should deteriorate from May as estimate-missing set shipment growth leads to reduced TV panel purchases.
▶ In May, we recommend SEC and SEMCO as our top picks, as both should generate solid earnings momentum in 2Q13 due to the release of the Galaxy S4, while share performances have been relatively weak. Meanwhile, concerns over SEMCO due to the weak JPY should fade as Japanese peers slump in 1Q13, and earnings should grow fueled by the Galaxy S4. We recommend LGE, SK Hynix and Cheil Ind – which were top picks since Mar – as our second picks. LGE’s smartphone shipment growth and TV margin improvements remain intact. SK Hynix’s 2Q13 bit growth (DRAM 10%, NAND 24%) should push OP up to W811.0bn. Cheil Ind’s OLED materials should expand and polarizing film should turn around from 1Q13.
