Expectations for Samsung Electronics Foundry Felt in Intel's Earnings | Park Se-ik Senior Managing Director & Chesley Investment Advisory [Morning Brief / 24.07.26.Fri]
[Highlight] Expectations for Samsung Electronics Foundry Felt in Intel's Earnings | Park Se-ik Senior Managing Director & Chesley Investment Advisory [Morning Brief / 24.07.26.Fri]
Speakers
Choi Ho
— Vice President
Park Se-ik
— CEO, ex-Chief Strategist
Summary
The discussion uses Intel’s deep foundry losses to set expectations for Samsung Electronics’ foundry turnaround. It then shifts to a detailed analysis of LS Electric’s surging earnings, driven by U.S. tech orders, and contrasts it with HD Hyundai Electric’s margin-driven caution and Hyosung Heavy’s remaining improvement potential.
- Intel’s foundry operating margin was around -70%, providing context for Samsung’s foundry turnaround.
- Samsung’s foundry is expected to turn profitable with recent orders from Tesla, Apple, and others, and a 20% market share could add massive market cap.
- LS Electric delivered record earnings with explosive growth in switchgear orders from SpaceX/XAI, benefiting from short lead times that rapidly convert to revenue.
- LS Electric’s high P/E is justified by the strongest profit growth among peers, and its transformer mix still has room to expand.
- HD Hyundai Electric faces OP margin contraction and limited further improvement, prompting a cautious/selling stance.
- Hyosung Heavy has a much lower North American revenue mix than its order backlog, implying more margin upside than HD Hyundai Electric.
- The relative attractiveness of electrical equipment stocks may increase when semiconductor profit growth eventually slows.
Ideas
Foundry turnaround could massively boost market cap.
Samsung Electronics’ foundry business is expected to swing to profit after years of losses, with recent large orders from Tesla, Apple, and other big customers. A market share gain to around 20% could add an estimated 600–700 trillion KRW to the company’s market capitalization, making the foundry turnaround a key milestone for the stock.
Fastest profit growth among Korean power equipment.
LS Electric is the strongest profit-growth story among Korean electrical equipment peers. The surge is driven by a massive increase in switchgear orders from U.S. tech companies such as SpaceX and XAI, with very short delivery lead times (6–12 months) that convert revenue quickly. Despite a high P/E multiple (~54x forward), earnings growth justifies the valuation; the company still has room to improve margins as transformer revenue share is only 50–60%, leaving room for further upside relative to HD Hyundai Electric, which is already near peak margin. The stock is the preferred play in the transformer/switchgear cycle.
OP margin decline limits upside; sell.
HD Hyundai Electric’s operating profit margin has declined from its peak, and the stock price closely follows the margin trend. Even if the North American revenue mix rises further from 55% to 70%, the margin improvement will be limited because the margin is already high. Given the margin breakdown, a conservative/selling stance is warranted until margins recover to new highs.
North American margin improvement potential remains.
Hyosung Heavy Industries still has significant room for margin improvement because its North American revenue mix is only about 30%, while its order backlog shows a 70% North American share. This means its margin can expand meaningfully as higher-margin transformer sales from the backlog materialize, making it more attractive than HD Hyundai Electric, which is near peak margins.
