[Click eStock] "Samsung Electronics Expected to Improve Earnings in Memory Supercycle... Target Price Raised"

Target Price Raised by 31% Compared to Previous Estimate

On September 19, Hanwha Investment & Securities announced that it expects Samsung Electronics to see improved earnings due to a memory supercycle, and accordingly raised its target stock price from 84,000 won to 110,000 won. The investment opinion remains 'Buy'.

Kim Kwangjin, a researcher at Hanwha Investment & Securities, explained, "The upward revision of the target price is based on changing the valuation standard from this year's expected performance to next year's expected performance," adding, "Given the rapidly changing conventional memory supply-demand environment, we have raised our estimates for operating profit in the fourth quarter of this year and next year."

Samsung Electronics' earnings for the third quarter of this year are expected to exceed market expectations. Kim stated, "Third-quarter sales are projected at 84.1 trillion won, up 13% from the previous quarter, and operating profit is expected to increase by 129% to 10.7 trillion won, surpassing market forecasts." He added, "The key driver will be profit improvement in the Device Solutions (DS) division, with a strong recovery in memory performance centered on DRAM. As the favorable demand environment continues, shipment growth is expected to slightly exceed initial guidance at around 10%." The blended average selling price (ASP) is also projected to rise by 8%, reflecting both higher conventional DRAM prices and increased sales of high-bandwidth memory (HBM) 3E 12hi due to increased shipments. Kim commented, "As a result, DRAM operating profit is expected to increase to around 5.9 trillion won," and added, "NAND is also likely to see profit improvement thanks to a favorable demand environment and better product mix."

The narrowing of foundry losses is also noteworthy. Kim explained, "With the removal of one-off cost impacts and a general increase in the utilization rate of advanced processes below 7 nanometers, the fixed cost burden will improve rapidly," adding, "As a result, the non-memory segment's loss is expected to narrow to around 500 billion won, an improvement of about 2 trillion won from the previous quarter."

Earnings improvement is expected as the memory supercycle unfolds. Kim analyzed, "While server demand was initially expected to slow toward the end of the year, a surge in inference demand makes it likely that strong demand will continue into next year." He continued, "Although it is difficult to predict performance in next year's HBM4 market considering the disappointing results seen in this year's HBM3E, significant profit improvement is still possible solely from the recovery in the conventional memory sector." He added, "Even under conservative assumptions for next year's HBM business, the memory division could achieve operating profit of over 30 trillion won."

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