KB Securities on the 9th said Samsung Electronics has secured about 50% of global DRAM production capacity and is expected to stand out in the supercycle. It maintained an "Buy" investment rating and a target price of 160,000 won. Samsung Electronics closed at 109,500 won the previous day.
KB Securities recently estimated that Samsung Electronics raised fourth-quarter server DRAM contract prices by 60%–80%, executing the largest price hike on record.
Kim Dong-Won, head of research at KB Securities, said, "Despite this price increase, most customers excluding big tech companies have hardly received the server DRAM volumes ordered since November, so the sharp uptrend in prices is expected to continue."
In particular, server DRAM supply is only half of demand. Accordingly, Samsung Electronics, which has secured a maximum DRAM production capacity of 700,000 wafers per month and ranks No. 1 in DRAM capacity (capa), was analyzed to have the strongest competitiveness.
Next year, server DRAM demand is expected to increase 40% year over year, but supply will rise only 20%, making it far from sufficient to resolve the shortage.
Accordingly, KB Securities projected that Samsung Electronics will deliver an earnings surprise in the fourth quarter with revenue of 91 trillion won and operating profit of 19 trillion won. Operating profit is expected to rise 56% from the previous quarter and 192% from a year earlier.
Kim, the head of the division, said, "Over the past two years, Samsung Electronics has been trading at a price-to-book ratio (PBR) of 1.5 times, a 43% discount to competitors on average, due to delays in initial market entry for high bandwidth memory (HBM)3 and HBM3E," adding, "However, in the case of Samsung HBM4, which applies 1c DRAM and a 4-nanometer (nm; 1 nm = one-billionth of a meter) logic die, it has secured a maximum advantage in speed, and is expected to simultaneously meet big tech companies' demands for higher specs and increased volumes."
Meanwhile, Samsung Electronics is said to have passed quality tests for HBM4 for Google tensor processing units (TPUs). In the current HBM4 quality verification stage by big tech companies including Nvidia, no particular issues have been identified so far, raising expectations for broader HBM4 approvals.
Kim, the head of the division, analyzed, "In particular, Samsung Electronics' current share price appears to exclude the value of the HBM business, so the expansion of HBM4 approvals is likely to be a decisive inflection point that shifts Samsung Electronics' corporate value from a discount to a premium, accelerating a full-fledged re-rating of the stock."