[Click eStock] "Samsung Electronics to Recover Earnings with HBM4... Operating Profit to Rise 40% Next Year"

Operating Target Price Maintained at 90,000 Won
‘Buy’ Rating Reaffirmed

On August 29, KB Securities stated that it expects Samsung Electronics’ operating profit to increase by 40% next year due to a recovery in semiconductor performance driven by the expansion of HBM4 supply, maintaining a target price of 90,000 won and a ‘Buy’ investment rating. Samsung Electronics was also selected as the top pick within the semiconductor sector.

KB Securities researchers Kim Dongwon and Do Sangwoo said, “Samsung Electronics has confirmed strong performance in the initial development of HBM4 based on 1c nanometer (nm) DRAM,” and projected, “Through new capacity expansion at the Pyeongtaek campus in the first quarter of next year, the company will expand its HBM market share in 2026.” They analyzed that, since Samsung Electronics recently passed the internal mass production approval (PRA, Production Readiness Approval) for HBM4, it is highly likely to begin initial HBM4 production in the fourth quarter of this year.

In particular, as Nvidia is demanding high-level technical requirements from its suppliers, such as reduced power consumption and increased speed, the production process for HBM4E is expected to become even more complex due to the increased number of stacked layers. KB Securities explained, “If Samsung Electronics achieves stable yields in HBM4 production based on 1c nm, supply volume next year will show significant growth.”

Performance improvement is also expected. Samsung Electronics’ quarterly operating profit is projected to improve from a low of 4.7 trillion won in the second quarter to 8.8 trillion won in the third quarter (an 88% increase quarter-on-quarter, a 4% decrease year-on-year) and 9.2 trillion won in the fourth quarter (a 4% increase quarter-on-quarter, a 42% increase year-on-year).

Second-half operating profit for the semiconductor (DS) division is expected to reach 8.8 trillion won, a 31% increase year-on-year and a 491% increase compared to the first half. As a result, total operating profit for the second half is projected to reach 18 trillion won (operating margin of 11%), marking the highest level in four years since 2021.

The smartphone (MX) business is also expected to show a positive trend. Thanks to strong sales of the Galaxy Z Fold7 and Flip7, third-quarter MX sales are estimated at 33.8 trillion won (an 11% increase year-on-year), with operating profit at 3.3 trillion won (a 7% increase quarter-on-quarter, a 17% increase year-on-year).

KB Securities emphasized, “In 2026, Samsung Electronics’ total sales are expected to reach 328 trillion won (a 3% increase year-on-year), with operating profit at 41 trillion won (a 40% increase year-on-year, operating margin of 12.6%).” It added, “In particular, DS division operating profit will more than double to 21.6 trillion won (a 109% increase year-on-year), driven by improved DRAM profitability and reduced foundry losses.” The display (DP) division is also projected to see operating profit rise by 25% year-on-year to 4.5 trillion won in 2026, supported by increased supply of foldable panels for Apple iPhones.

Meanwhile, although Samsung Electronics’ stock price has declined by 7% over the past four years, KB Securities assessed, “If HBM4 supply expansion and new customer acquisition become full-scale, improvement in semiconductor performance will become visible,” adding, “Currently, Samsung Electronics’ stock price has entered a phase where it is less sensitive to negative news and more responsive to positive developments.”

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