Korea Investment Securities announced on July 31 that it has raised its target price for Samsung Electronics from 590,000 won to 650,000 won, reflecting structural changes in the memory business and the company's shareholder return policy. The firm maintained its 'buy' rating.
Chae Min-sook, a researcher at Korea Investment Securities, stated, "While it is difficult to predict when market concerns will ease, the current valuation does not fully reflect the strong performance, cash generation ability, and clear shareholder return policy of the company. It is essential to focus on the long-term corporate value rather than short-term market sentiment."
Korea Investment Securities has adjusted its operating profit forecasts for Samsung Electronics upward by 3% and 7% for 2026 and 2027, respectively, considering the expansion of multi-year supply contracts and the potential rise in high-bandwidth memory (HBM) prices in 2027. The company is expected to enhance its market share and profitability based on its production capacity advantage in the general DRAM and NAND flash markets while strengthening its technological competitiveness centered on HBM4. The firm also highlighted the attractiveness of Samsung's policy to return 50% of the free cash flow generated from record-high performance to shareholders.
In the second quarter, Samsung Electronics reported sales of 171.5 trillion won and an operating profit of 89.5 trillion won, marking increases of 130% and 1,814%, respectively, compared to the same period last year. The operating profit exceeded market consensus by 5.5%. The semiconductor division accounted for 99.7% of the total operating profit, with operating profit reaching 89.2 trillion won. The average selling prices (ASP) of DRAM and NAND flash increased by mid-40% and high-60%, respectively, compared to the previous quarter, and the foundry business is estimated to have turned profitable, excluding employee performance-related provisions.
The shift in the memory business structure towards long-term supply contracts was also viewed positively. Samsung Electronics has signed multi-year contracts of at least five years with five major global hyperscalers and is reportedly in the final stages of contract negotiations with five large AI-related clients.
Chae noted, "Multi-year contracts enhance the stability and visibility of the memory business while enabling investment execution based on customer demand, reducing the likelihood of oversupply as seen in the past. The company will focus on balancing production proportions of HBM and general DRAM while prioritizing long-term supply stability and strengthening partnerships with customers over short-term profitability."
* This article has been translated by AI.
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