Samsung Electronics Co Ltd <005930.KS> is headed for a robust year after October-December profit estimates came above market forecasts as the company rides a recovery in memory chips, its cash cow business.

Analysts have upgraded their outlook for Samsung, the world's top maker of memory chips and flat-screen TVs. However, the stock dipped on Thursday after closing at a record high the previous day.

Demand for TVs, as well as LCD panels and chips remains healthy at the moment, and that will likely pick up toward the Chinese New Year, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo.

Samsung, South Korea's biggest company valued at $109 billion, made a spectacular turnaround last year, but concerns remain over tougher competition and a strengthening won that weakens Samsung's pricing power.

Japanese rivals including Sony Corp <6758.T> are beefing up offerings in LCD TVs to reclaim market share, while Samsung also faces an uphill battle with smartphone leaders such as Apple Inc .

In handsets and household goods, it looks difficult to avoid the impact of the stronger won, and higher marketing and promotion costs to fight deepening competition will lower margins slightly, said Hana Daetoo Securities analyst Lee Jeong.

Robust sales of flat-screen TVs have been another key driver for Samsung, the world's biggest maker of liquid crystal display (LCD) panels and TV sets. Shortage of raw materials kept LCD prices high while Samsung established itself as a leader in the premium LCD TV segment which uses light emitting diode (LED).

In the TV market, competition with Japanese makers is set to become tougher this year, and that will put pressure on margins, said Dashin Securities analyst John Park. However, considering the growing market and that Samsung is likely to stay the No.1 maker, the trend is still favourable for Samsung.

On Thursday, Samsung also unveiled an ambitious set of targets for this year's flat-screen TV sales, estimated to jump by around 30 percent from last year.

Samsung's 2010 net profit is set to rise to 12.49 trillion won from an estimated 9.64 trillion won last year, according to analysts polled by Thomson Reuters I/B/E/S. Two months ago, the 2010 consensus forecast was for 12.27 trillion won.

Samsung shares jumped 77 percent last year, outperforming a 50 percent gain on the broader market <.KS11>.

STRONG CHIP BUSINESS

Samsung estimated preliminary fourth-quarter consolidated operating profit at a median 3.7 trillion won ($3.27 billion) compared with a consensus forecast of 3.54 trillion won from Thomson Reuters I/B/E/S.

The profit estimate, in a range of 3.5 trillion-3.9 trillion won, is a sharp improvement from a 0.74 trillion won consolidated operating loss in the 2008 fourth quarter, although smaller than a 4.23 trillion won profit in the previous quarter.

DRAM will play a cash cow role for Samsung for the time being. Expectations for new products such as e-books will raise demand for NAND chips in the longer term and highlight its growth potential, said Hana Daetoo's Lee.

Samsung estimates fourth-quarter consolidated sales at a median 39 trillion won, which would be a record, in a range of 38-40 trillion won. It is due to report official quarterly results later this month.

(Additional reporting by Kim Yeon-hee and Jungyoun Park in SEOUL and Kiyoshi Takenaka in TOKYO; Editing by Jonathan Hopfner and Anshuman Daga)

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