Sangsangin Investment & Securities said Samsung Electronics has entered a memory price upcycle due to structural supply constraints, and the foundry institutional sector's narrowing losses are becoming visible. It maintained its "Buy" rating and raised the target price to 150,000 won from 110,000 won. Samsung Electronics closed the previous trading day at 128,500 won.
Jung Min-gyu, an analyst at Sangsangin Investment & Securities, said, "There is a risk that the sharp rise in memory prices will lead to a finished goods (Set) cost burden, which could weaken end demand and limit spec upgrades, and intensified competition in high bandwidth memory (HBM) is also expected," but added, "With increased supply allocations to key clients, an improved mix centered on high value-added products, and a structural uptrend in general-purpose memory prices, steep earnings improvement is expected in the Device Solutions (DS) institutional sector."
Sangsangin Investment & Securities estimated that Samsung Electronics posted sales of 90.1 trillion won and operating profit of 18.7 trillion won in the fourth quarter of last year (Oct.–Dec.). That would be up 18.9% and 188.1% from a year earlier, respectively, with operating profit expected to far exceed the market consensus of 16.5 trillion won.
Jung said, "This earnings strength will be led by the DS institutional sector," adding, "Thanks to a higher share of server-focused high value-added products and HBM3E, DRAM bit shipments are expected to rise 10% quarter over quarter and average selling price (ASP) 16%, with sales of 24.6 trillion won."
He added, "For NAND, sales are expected to reach 8.9 trillion won on the back of increased adoption of high-capacity eSSD," and "The foundry institutional sector's losses are also likely to narrow with more captive volume and stabilized Production yield."
Backed by strong prices, earnings are expected to improve this year as well. Sangsangin Investment & Securities projected first-quarter (Jan.–Mar.) sales and operating profit at 93.9 trillion won and 22.1 trillion won, respectively. That would mark increases of 4.2% in sales and 18.4% in operating profit from the previous quarter.
Jung explained, "The usual seasonal slack is likely to be offset as clients add strategic inventory stocking in anticipation of higher general-purpose memory prices," adding, "An increase in HBM3E volume and the start of HBM4 mass production are also expected, and with rising foundry (semiconductor contract manufacturing) utilization and Production yield, DS-led earnings improvement is anticipated."