[Top Semiconductor Stock①] Samsung Electronics... Buy Now Regardless of Memory Market Conditions

[Asia Economy Reporter Lee Seon-ae] #In recent years, the stock prices of memory companies have started to lead DRAM prices by more than six months. It is expected that DRAM prices will hit the bottom in the second quarter of next year, so it is judged that stock purchases should begin around November. The foundry market is expected to continue its boom. If foundry companies do not timely mass-produce new semiconductors, fabless and finished product customers will face delays in product launch schedules. The foundry companies capable of implementing cutting-edge processes are narrowed down to TSMC and Samsung Electronics, and although Intel has declared participation, there is uncertainty due to the need for a verification period. For the time being, the investment and growth pace of foundry companies is expected to accelerate sharply.

Hanwha Investment & Securities has presented Samsung Electronics as the top preferred large-cap semiconductor stock. With the timing to buy memory stocks approaching within 1-2 months, Samsung Electronics is also showing performance improvements in foundry and smartphone businesses, making it the primary target for purchase. For small and mid-cap stocks, Hanwha recommended mainly foundry post-processing companies such as Hana Micron, Hanmi Semiconductor, LB Semicon, Techwing, and ISC.

According to Hanwha Investment & Securities on the 2nd, Samsung Electronics' third-quarter earnings are expected to exceed initial estimates with sales of KRW 76.4 trillion and operating profit of KRW 16.1 trillion. This is due to the strong performance of the semiconductor and smartphone businesses. Thanks to rising memory prices and improved system semiconductor performance, semiconductor operating profit is expected to reach KRW 9.8 trillion. In particular, the system semiconductor business is estimated to have achieved an operating profit margin of over 10%, driven by the three factors of foundry price increases, volume growth, and yield improvement. The IM division recovered operating profit to the high 3 trillion won range due to strong sales of the Galaxy Z series.

For 2022, sales of KRW 316.8 trillion and operating profit of KRW 62.8 trillion are forecasted. This marks the first time in history to enter the era of KRW 300 trillion in sales and KRW 60 trillion in operating profit.

Memory prices are expected to undergo a short decline until the second quarter of next year and then rebound from the second half. Although there are short-term concerns about IT device demand slowing due to the resumption of economic activities, considering limited inventory and investment status, excessive oversupply is unlikely. On the other hand, with the proven product quality of foldable smartphones and the system semiconductor business entering its main track, it is judged that the performance of non-memory business sectors will provide stable support.

Samsung Electronics' buy rating and target price of KRW 105,000 were maintained. Recently, the stock price fell further due to Micron's low earnings guidance. Micron's low sales guidance is largely due to shortages of some components such as NAND controllers. However, Samsung Electronics internalizes key components, so such concerns are limited. Researcher Lee Soon-hak of Hanwha Investment & Securities said, "The possibility of bit growth decline in the fourth quarter is low, and performance improvements are appearing in non-memory businesses, so it is judged to be better than competitors," adding, "If the business portfolio is balanced, valuation is expected to be re-evaluated, so buying should start now."

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