KB Securities kept Samsung Electronics(005930)'s target price at 600,000 won. The outlook is that earnings will also increase sharply as the memory market improves, with additional shareholder returns expected within the year. The previous trading day's closing price of Samsung Electronics was 250,000 won.
Kim Dong-Won, head of research at KB Securities, said, "If additional shareholder returns within the year and the direction to strengthen the next three-year return policy are fleshed out, a powerful re-rating phase is likely to unfold for the first time in 10 years since quarterly dividends began in 2017, driven by improving earnings and large-scale shareholder returns."
Samsung Electronics announced a three-year shareholder return plan to secure a total of 140 trillion won for shareholder returns from 2024 to 2026. Of this, the remaining funds are 110 trillion won, and excluding the 30 trillion won cash dividend in the third quarter, 80 trillion won remains.
Kim projected that, in addition to the 30 trillion won cash dividend in the third quarter, a 40 trillion won cash dividend in the fourth quarter and a 40 trillion won share buyback and cancellation would take place. Assuming the application of separate taxation on dividend income and meeting the 25% payout ratio requirement, the cash dividend in the second half could expand to a total of 70 trillion won. Based on this second-half cash dividend, the dividend yield was expected to top 4%.
Attention also turned to the next three-year shareholder return plan to be unveiled. Kim said, "In the new shareholder return policy for 2027 to 2029, there is a possibility that a new return policy above 50% could be presented, compared to the existing level of 50% of free cash flow (FCF)."
Earnings momentum was also expected to continue. As the share of five-year long-term agreements (LTA), which account for 70% of memory capital expenditure (CAPA), increases, customized investments by customer become possible, improving mid- to long-term earnings visibility.
In particular, it noted that, following U.S. hyperscalers such as Google and Amazon, major Chinese hyperscalers including Baidu, Alibaba, and Tencent are increasingly demanding five-year LTAs. Considering the structural constraint that it takes more than three years from completion of a new memory production line to mass production, it projected that memory undersupply will continue at least until 2028.
Accordingly, it estimated Samsung Electronics' operating profit in the second half at 221 trillion won, up 587% from a year earlier. It projected that record results will be renewed for five consecutive quarters after the fourth quarter of 2025.
In the foundry business, it projected that, starting in the third quarter, with the full-scale mass production of 4-nanometer (nm) LPU and stabilization of yields, the probability of turning to profit is high, excluding performance bonus provisions.