As the share prices of SK hynix and Samsung Electronics jumped 28.62% and 23.13%, respectively, over three trading days in May, projections of "300-man-nix" and "500,000-electronics" from the securities industry are drawing attention.
SK Securities said on the 7th in a report that it raised the target prices for Samsung Electronics and SK hynix to 500,000 won and 3 million won, respectively.
Han Dong-hee, an SK Securities researcher, said, "We raised the target price by restoring the price-earnings ratio (PER), which had been cut to reflect economic concerns stemming from a U.S.-Iran war, back to the previous level."
Earlier, in Nov. last year, the researcher was the first to project "100-man-nix." At the time, SK hynix shares were in the 600,000-won range.
This year's earnings outlook was also raised. Operating profit this year was projected at 338 trillion won for Samsung Electronics and 262 trillion won for SK hynix. That is up 3% and 4%, respectively, from the previous estimates. Operating profit in 2027 was adjusted up 18% to 494 trillion won for Samsung Electronics and up 15% to 376 trillion won for SK hynix.
The researcher said, "At the core of the recent memory stock rally is a perception that memory is markedly undervalued within artificial intelligence (AI) names, and this is based on confidence in a structural enhancement of memory's 'earnings-generating power.'"
The view that the recent industry strength was merely a temporary phenomenon driven by supply-demand is starting to change.
The researcher explained, "The unprecedented enhancement of memory earnings-generating power is driven more by structural changes in demand than by supply constraints," adding, "In the phase of AI advancement, memory demand is shifting to longer cycles and lower amplitudes than in the past."
At the same time, the researcher cited as grounds the fact that, despite surging memory prices, discussions are underway for highly binding long-term supply contracts of about three to five years.
The researcher analyzed, "Long-term supply contracts will, through a dual-market structure in memory, establish justification for differentiation by customer, market, and terms, forming a basis to enhance the stability of memory earnings."
At the same time, the researcher said the valuation method will continue to use PER (price-earnings ratio) instead of PBR (price-book value ratio), which had been used to value semiconductor companies.
The researcher also said the memory re-rating is still only in its early stages. "Even with the stock rally, the 12-month forward PERs of Samsung Electronics and SK hynix are 6.0 times and 5.2 times, respectively," the researcher said, emphasizing, "Considering broader buying interest in Korean memory, the appeal of undervaluation is only beginning to emerge."
On the same day, Mirae Asset Securities also raised its target price for SK hynix by 35% to 2.7 million won from 2 million won.