[Click eStock] "Samsung Electronics in H2, Focus on New Investments, DRAM Demand, and Shareholder Returns"

Increased Expectations for New Investments in the Second Half... Possible Normal Recovery of DRAM Demand
"New Shareholder Return Policy Also Revealed... Dividends May Increase"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] In the second half of the year, attention should be paid to Samsung Electronics' new foundry investments, the shortage of DRAM, and the strengthening of shareholder return policies, according to an analysis.

On the 2nd, Mirae Asset Daewoo forecasted that Samsung Electronics will invest more than 9.2 trillion KRW in the foundry sector next year. Researcher Younggeon Kim of Mirae Asset Daewoo said, "The market is likely to immediately translate Samsung Electronics' investment decisions into corporate value," adding, "The return on investment for the 7-nanometer (nm) and below processes, where the monopolistic position is solidifying, is very high, and it can apply the average return on invested capital (ROIC) of 23.5% and price-to-earnings (P/E) ratio improvement of 18.0 times from Taiwan's TSMC." He explained that if consensus is formed on the foundry investment amount, it could be valued at about 40 trillion KRW in market capitalization.

Attention should also be paid to whether the DRAM supply shortage will intensify. Based on the sales trends of global equipment companies related to DRAM in the first quarter, it is assessed that new DRAM equipment investments were conservative up to the first quarter. Even if new equipment is executed from now on, meaningful supply increases are expected to be limited until the end of the year. Despite the overall weak demand this year, conservative supply means that the annual inventory level will be maintained at a normal level.

Ultimately, if demand next year recovers to the existing growth trajectory under normal inventory conditions, a supply shortage situation may occur. Researcher Kim said, "Next year's DRAM supply and demand will be the tightest among the past five years," and "DRAM prices in the second half of this year, which will reflect this in advance, are expected to remain stable."

Strengthening the shareholder return policy should also be monitored. This year marks the end of the shareholder return policy over the past three years. The existing shareholder return policy was based on assuming free cash flow (FCF) of 59.9 trillion KRW over three years and returning half of it to shareholders. So far, shareholder returns including share buybacks and cancellations worth about 9.3 trillion KRW have been implemented twice, totaling about 9.6 trillion KRW each time. Researcher Kim said, "If the currently estimated profits and investments are realized, shareholder return capacity is expected to increase by more than 9 trillion KRW compared to previous assumptions, and it is highly likely that shareholder returns will be made through dividends," adding, "The new dividend policy to be disclosed in the second half of the year is likely to consider measures to enhance shareholder value more than in the past, so the dividend per share (DPS) of 354 KRW could be exceeded."

Against this backdrop, Mirae Asset Daewoo gave Samsung Electronics a 'Buy' investment opinion with a target price of 68,000 KRW. The closing price on the previous day was 50,400 KRW.

This content was produced with the assistance of AI translation services.