KB Securities on the 21st said Samsung Electronics(005930) is set to enter a full-fledged phase of valuation normalization, as structural memory supply shortages, profit growth, and a strong shareholder return policy align.
KB Securities said visibility on Samsung Electronics' future results has increased further. Kim Dong-Won, head of research at KB Securities, estimated that Samsung Electronics' operating profit will log steep growth to 33 trillion won in 2024, 44 trillion won last year, 381 trillion won this year, and 575 trillion won next year.
Kim said, "As memory supply shortages deepen structurally, and it takes at least more than three years from completion of new memory fabs to full-scale operation, it will be difficult to resolve supply constraints in the short term."
In particular, hyperscalers (large data center operators) prefer five-year long-term agreements (LTA) to secure stable memory procurement, and cases are increasing in which they even demand one-year rollover conditions, leading to expectations that tight supply-demand conditions will continue for years.
Third-quarter results this year are expected to set a record high for Samsung Electronics. KB Securities projected Samsung Electronics' third-quarter operating profit this year at 112 trillion won (55% operating margin), a sharp 817% jump from a year earlier. This would mark record highs for four consecutive quarters since the fourth quarter of last year (20 trillion won in operating profit). Third-quarter memory operating margins this year are estimated at 83% for DRAM and 71% for NAND.
The improvement trend in the foundry business is also notable. Kim said, "Reflecting the recent 15% price hike and the ramp-up of mass production of 4-nanometer (nm) LPU, excluding one-off costs such as performance bonus provisions, a turnaround to profit is expected for the first time in four years since 2022."
Expectations are also rising for expanded shareholder returns on the back of strong earnings growth. KB Securities estimated that if Samsung Electronics applies a policy of allocating 50% of cumulative free cash flow (FCF) over the past three years (2024–2026) to shareholder returns, the scale of a special dividend within the year based on remaining resources would exceed at least 100 trillion won.
Deputy Minister Kim Dong-Won said, "If the cash portion of the special dividends increases, the high dividend yield will stand out, making it possible for the stock price to settle in the 300,000-won range in the short term," adding, "With Samsung Electronics shares at only about 4 times PER now, they are set to enter a full-fledged phase of valuation normalization and re-rating."