[Click eStock] "Samsung Electronics, Stock Price Hits 'Bottom' in Q1"

[Asia Economy Reporter Kwon Jaehee] KB Securities maintained a 'Buy' rating on Samsung Electronics on the 19th, setting a target price of 80,000 KRW.

The production cut effect of Samsung Electronics is expected to appear from the second quarter. From the first quarter, indirect production cuts are anticipated through production line relocation, delays in new expansions, and expansion of fine process transitions, so the production cut effect is expected to manifest from the second to third quarters. Samsung Electronics' indirect production cut effect is estimated to reduce global DRAM and NAND supply by 7%. In particular, at a time when semiconductor inventory of client companies is expected to decline for the first time in a year in the first quarter, Samsung Electronics' production cuts are likely to stimulate inventory accumulation demand from clients who are expected to normalize their inventory in the future.

Accordingly, the stock price is expected to form a bottom in the first quarter. Since 2000, in semiconductor downturn cycles, signals of bottoming in the industry and stock prices have been the visualization of production cut effects, inventory reduction, and slowdown in price declines. Considering that the semiconductor industry history has repeated over the past 20 years, this year is unlikely to be an exception. This is because the production cut effect is expected to become visible from the second quarter, client companies' semiconductor inventories are expected to approach normal levels, and the price decline of DRAM and NAND is expected to slow down.

Dongwon Kim, a researcher at KB Securities, analyzed, "The direct production cut efforts implemented by global semiconductor companies from the fourth quarter of last year and the indirect production cut effects from first quarter line relocations and delays in new expansions will affect memory semiconductor supply and demand improvement from the second quarter. Since semiconductor stock prices reflect the industry conditions more than six months in advance, Samsung Electronics' stock price is also expected to form a bottom in the first quarter, which is the worst period of the industry."

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