Kiwoom Securities said on the 1st that Samsung Electronics' D-RAM capital expenditures for next year are expected to increase significantly, which should benefit Hansol Chemical. It raised its target price to 300,000 won from 260,000 won and maintained a buy rating. The previous trading day's closing price of Hansol Chemical was 238,000 won.
According to Kiwoom Securities, the D-RAM business, which had been expected to enter a supply shortage from the third quarter of this year, began recording price increases beyond market expectations in the latter part of the third quarter. In the fourth quarter of this year, demand for D-RAM is expected to exceed supply by about 1.2%.
Bak Yu-ak, an analyst at Kiwoom Securities, said, "The high profitability of high bandwidth memory (HBM) has begun to set a psychological baseline for suppliers of commodity D-RAM, and strong demand for D-RAM for artificial intelligence (AI) servers has led to a reduction in DDR5 supply to the PC market."
He added, "This is also leading to a reduction in the amount that can go to module customers, creating a strong virtuous cycle of a spike in spot prices and a surge in contract prices for commodity D-RAM."
Next year's D-RAM capital expenditures (CAPEX) are expected to total $51.9 billion (about 76.3189 trillion won). That is up 63% from the five-year average of $31.9 billion (about 46.9089 trillion won). For Samsung Electronics, next year's D-RAM CAPEX is expected to be $16.6 billion (about 24.4103 trillion won), up 17% from a year earlier.
Bak said, "This CAPEX will be invested in equipment for Pyeongtaek Plant 4 and infrastructure construction for Pyeongtaek Plant 5, and some will be used to convert cleanroom space at Pyeongtaek Plant 4," adding, "Demand for hydrogen peroxide from Hansol Chemical is expected to increase significantly."
He continued, "SK hynix's Yongin Plant 1 and Samsung Electronics' Pyeongtaek Plant 5 will be completed going forward," adding, "These customers' investment and ramp-up schedules could serve as major momentum (upside potential) for Hansol Chemical's earnings and share price." Kiwoom Securities selected Hansol Chemical as its top pick in the semiconductor sector.