There is an outlook that the combined operating profit of Samsung Electronics(005930) and SK hynix(000660) will approach 1,000 trillion won in 2027. In contrast, the two companies' price-earnings ratios (PER) have fallen to around 3 times, leading to the analysis that future earnings improvements are barely reflected in their share prices.
On the 13th, Kim Dong-Won, head of research at KB Securities, forecast that the combined operating profit of Samsung Electronics and SK hynix will rise from 91 trillion won in 2025 to 641 trillion won this year and 964 trillion won in 2027. The 2027 estimated operating profit is 575 trillion won for Samsung Electronics and 389 trillion won for SK hynix.
Compared with the pace of earnings growth, current share prices are assessed to be in an extremely undervalued zone. Based on the closing price on the 12th, the PER applying the 2027 estimated earnings comes to 3.7 times for Samsung Electronics and 3.2 times for SK hynix. This is attributed to the process of unwinding excessive margin leverage positions recently, during which the two companies' share prices fell more than 40% from their peaks.
Deputy Minister Kim said, "The outlook for next year's earnings improvement is not reflected in share prices at all," and analyzed that there is significant room for a valuation re-rating going forward.
It was also expected that record-high results will continue in the third quarter this year. KB Securities estimated Samsung Electronics' third-quarter operating profit at 112 trillion won, up 817% from a year earlier. SK hynix is projected to post operating profit of 77 trillion won, up 579%.
With long-term supply contracts centered on hyperscalers being fully reflected, more than 60% of total memory output has already been secured for supply, and memory prices are also highly likely to rise, the explanation said.
Expanded shareholder returns were also cited as a factor that could drive a valuation re-rating. KB Securities projected that newly announced shareholder return policies by Samsung Electronics and SK hynix soon will simultaneously lead to a valuation re-rating and share price gains. In particular, Samsung Electronics is estimated to be capable of at least 600 trillion won in shareholder returns over the next three years and a dividend yield of more than 7%.
Deputy Minister Kim noted that large-scale shareholder returns could attract inflows from global sovereign wealth funds and major long-term capital such as Temasek and the Abu Dhabi Investment Authority (ADIA), saying, "As the medium- to long-term supply-demand base strengthens, a valuation re-rating will begin in earnest."