As Samsung’s profit surges, some investors worry about peaking growth

SEOUL: Even as Samsung Electronics Co Ltd is poised to deliver a surge in earnings to an all-time high this year, some investors are already starting to fret the tech giant will soon become a victim of its own success.

With a market capitalisation of 331 trillion won ($293 billion), the South Korean firm has emerged as Asia´s most valuable company and its shares have jumped 60 percent since end-2015, hitting a record high in late March.

The outlook is upbeat with analysts seeing high chip prices continuing at least through to the end of this year, and the launch of a new flagship smartphone this month reviving its mobile business after last year´s Galaxy Note 7 fires.

But the stock is losing steam, up just 3 percent so far in April, and some investors are questioning the company´s long-term growth potential and whether it can maintain the double-digit profit growth expected this year.

"People are starting to worry whether Samsung can repeat these kinds of numbers next year," said Park Jung-hoon, fund manager at HDC Asset Management. "There´s no reason to be the first to jump off, but those worries will grow as time passes.

"Samsung´s operating profit is expected to grow just 5.5 percent next year compared to 61 percent in 2017, according to the average forecast from a Thomson Reuters survey of 16 analysts.

The driver of Samsung´s rally has been the booming memory chip market, with prices for both DRAM and NAND chips soaring as suppliers scramble to meet demand for more firepower from mobile devices and data servers.

Researcher IHS expects 2017 memory industry revenues to leap 32 percent to a record $104 billion this year. But this growth will not be repeated, analysts say, with more production capacity coming online to alleviate the bottleneck.

IHS projects 2018 memory industry revenue to grow by just 3 percent to $107 billion. There is also concern product makers could reach "pricing fatigue" and maintain current chip capacity for new products instead of adding more. "It feels like we might be reaching a little bit of that right now (for DRAM)," IHS analyst Mike Howard said during a Seoul media briefing earlier this month.