KB Securities said the initial public offering of Chinese memory chipmaker Changxin Memory Technologies (CXMT) will instead serve as a chance to re-highlight Samsung Electronics' competitiveness and market dominance, maintaining a "Buy" rating and a target price of 5.3 million won.
Kim Dong-Won, head of research at KB Securities, analyzed that "the CXMT IPO may stoke concerns about intensifying competition, but in reality it will serve as a chance to re-highlight the technological competitiveness and market dominance of the three global DRAM companies—Samsung Electronics, SK hynix and Micron."
Kim particularly assessed, "Even if CXMT secures large-scale funding through its listing, it appears virtually impossible to upset the landscape of the high-performance server DRAM market—such as high bandwidth memory (HBM), DDR5 and LPDDR5—due to the technological gap and differences in customer structure."
KB Securities forecast that Samsung Electronics' operating profit in the second quarter of this year will reach 90 trillion won, up 19 times from a year earlier. It said supply shortages are deepening as memory supply fulfillment by clients remains around 50%, and the magnitude of DRAM and NAND price increases is expected to far exceed market expectations.
Kim said, "DRAM and NAND price growth in the second quarter is projected to reach 60% each," adding, "From the third quarter, supported by increased shipments of high-value-added memory, achieving quarterly operating profit of more than 100 trillion won will be possible."
While the CXMT listing is evaluated as an example that shows the growth of China's memory industry, some analyses also say the technological gap with Samsung Electronics remains large in the high-performance AI memory market.
Kim explained, "CXMT's HBM, DDR5 and LPDDR5 are produced on a legacy process-based production structure, creating a large technological gap with Samsung Electronics in terms of net die competitiveness and performance," adding, "In terms of speed, power efficiency and big tech certifications, there are clear limits to meeting demand in the AI server and high-performance computing markets."
Kim added, "The CXMT IPO may act as a competitive variable for Taiwanese DRAM companies, but for Samsung Electronics it will serve as a chance to highlight differentiated technology, a customer base and the potential for structural profit improvement," noting, "It is expected to be a catalyst for a re-rating of its premium as the No. 1 global memory company."
KB Securities assessed that Samsung Electronics' current share price, trading at 5.9 times 12-month forward price-earnings ratio (PER), does not fully reflect future earnings improvement and its dominance in high-value-added memory markets.