BNK Investment & Securities on the 15th cut its rating on Samsung Electronics(005930) to "hold," saying the slowdown in memory semiconductor demand is continuing and the stock's upside is limited. It also lowered its target price to 270,000 won from 300,000 won. The previous day's closing price of Samsung Electronics was 249,000 won.
It also projected that SK hynix(000660)'s second-half results will fall short of expectations due to slowing memory semiconductor prices and a stronger won.
BNK Investment & Securities lowered its estimate for Samsung Electronics' third-quarter operating profit by 5% to 108.5 trillion won from 114.7 trillion won. It also cut the fourth-quarter operating profit estimate by 2% to 118.8 trillion won from 121.7 trillion won. The figures reflect a reduced quarter-over-quarter increase in DRAM average selling prices (ASP), a weaker won-dollar exchange rate, and sluggish results at Samsung Display (SDC).
It also downgraded SK hynix's second-half earnings outlook. It lowered the estimate for third-quarter operating profit by 6% to 72.1 trillion won from 76.4 trillion won, and cut the fourth-quarter operating profit estimate by 4% to 76.4 trillion won from the previous 79.7 trillion won.
The analysis said that is because the slowdown in memory semiconductor demand is continuing while the capacity expansion race is intensifying.
Lee Min-hee, an analyst at BNK Investment & Securities, said, "As the price (cost) of memory semiconductors within systems hits a ceiling, demand elasticity is weakening in servers following IT products," adding, "In the large language model (LLM) market, the share of closed models has plunged, and price cuts from intensifying competition have driven the per-token payment price to drop by more than half since June."
The analysis said this will lead to slower revenue growth and become a factor that reduces the capacity to purchase semiconductors.
The analyst added, "In fact, Google and Meta are shifting from a performance race to strategies that improve cost-effectiveness and energy efficiency, and OpenAI and Anthropic are also moving to moderate the pace of frontier model development and focusing on restoring security and reliability," noting, "Macroeconomic uncertainty is rising, memory semiconductor prices can hardly go higher, and demand elasticity is declining."
In this situation, manufacturers are instead optimistic about long-term demand and are aggressively expanding capacity, making the direction of memory supply and demand look unfavorable.
The analyst said, "Shareholder return programs are positive but are unlikely to affect the stock's direction," adding, "In the case of Samsung Electronics, there are expectations for improved foundry profitability, but that is largely priced into the stock."
On SK hynix, the analyst said, "AI server shipments remain strong and valuation supports the downside, but as demand momentum continues to slow, the upside will also be capped below the average valuation level."