Samsung Electronics JPMorgan

Samsung Electronics JPMorgan

related to a union strike

The main cause of the union strike appears to be wage negotiations, and the union is calling for a transparent incentive system and additional annual leave days. Strikes, since most processes are automated, have a limited impact on semiconductor supply, but failure to reach an agreement in the long term could increase the size and duration of the strike, which could pose a downside risk to earnings. In addition, the sensitivity analysis to changes in labor costs expects a 4%/8% increase in labor costs to result in the following downside risks. We expect a 3%/7% downside risk to earnings per share, respectively. We expect stock prices to move within the box in the short term, and we are keeping an eye on further developments on this issue.

- Limited impact on semiconductor supply in the near term

The impact on semiconductor supply in the short term will be limited. Nevertheless, prolonged scale and duration of the strike could pose a downside risk to earnings if the strike is prolonged. It could lead to long-term strikes and higher labor costs. According to our sensitivity analysis, if labor costs are gradually increased by 4%/8%, the downside risk on EPS will be 3%/7% respectively. It is noteworthy that labor costs account for 15% of total revenue. It is expected to account for 15% of revenue (compared to 13% on average over the past five years) and 15% of gross operating profit.  

Keep 110,000 won overweight