SK Securities said on the 1st that the semiconductor upcycle will last and raised its target prices for Samsung Electronics and SK hynix to 6.1 million won and 4 million won, respectively. As of the day's close, Samsung Electronics and SK hynix ended at 349,000 won and 2,363,000 won, respectively.
Earlier, on Apr. 8, SK Securities set target prices for Samsung Electronics and SK hynix at 500,000 won and 2 million won, respectively, and on the 7th of last month raised the targets for the two stocks again to 500,000 won and 3 million won.
It projected this year's operating profit for Samsung Electronics and SK hynix at 378 trillion won and 272 trillion won, respectively. The estimates are up 12% and 4% from before. For 2027, it raised operating profit to 570 trillion won for Samsung Electronics and 423 trillion won for SK hynix, up 10% and 13%, respectively.
Han Dong-hee, an analyst at SK Securities, said, "Securing demand visibility through long-term agreements (LTA), the 'dual market' effect, and a strong price hike for high bandwidth memory (HBM) in 2027 are the grounds for the target price increase," adding, "As the unprecedented structural upcycle extends, earnings visibility is improving further."
Specifically, it saw long-term agreements driving stable growth in the cycle. Demand visibility for about three to five years will be secured, and higher floor pricing will lead to earnings stability, it said. In particular, as long-term contract volumes are allocated first, the volumes released to the spot market inevitably shrink, which could deepen the spot market's supply shortage and keep prices strong, it analyzed.
It also analyzed that HBM price hikes in 2027 are inevitable. According to SK Securities, with recent DDR5 prices rising to the level of HBM, changes are being detected in memory makers' production strategies. HBM is a high value-added product, but due to high cost burdens, its profitability is not significantly superior to DDR5. As a result, the economic incentive to concentrate capacity on HBM has somewhat weakened, it assessed. Even so, backed by expanded AI server investment and growth in the next-generation HBM market, it forecast that 2027 HBM prices will rise more than 50% from this year.
Rising HBM prices also act to reduce overall memory supply. HBM has a more complex manufacturing process than commodity DRAM, so even with the same capacity input, output is lower. The more memory makers increase the share of HBM output, the more commodity DRAM supply inevitably declines, and given limited production space, it could also affect NAND supply, the analysis said.
It also said shareholder returns are likely to ramp up in the second half. As the memory upcycle driven by expanding AI demand extends, semiconductor makers' earnings power and visibility have improved compared with the past, according to assessments. Accordingly, shareholder return policies are highly likely to be strengthened starting in the second half, it said. For SK hynix, net cash is projected to top 100 trillion won in the third quarter of 2026, and for Samsung Electronics, with its existing three-year shareholder return policy ending this year, attention is on whether it will announce a new return policy.
SK Securities projected that the undervaluation of Korea's memory semiconductor corporations will be resolved. The current 12-month forward price-earnings ratios (PER) are 5.8 times for Samsung Electronics and 6.2 times for SK hynix, which are 43% and 39% lower, respectively, than Micron's 10.2 times.
Analyst Han Dong-hee added, "In particular, considering future growth drivers such as the full-fledged HBM business and increased foundry orders, Samsung Electronics' stock is excessively undervalued relative to its earnings power," adding, "We maintain our overweight view on the semiconductor sector."