DS Investment & Securities maintains Samsung Electronics' target at 530,000 won, lowers SK Hynix's target to 2.64 million won

DS Investment & Securities reported on the 29th that the performance of Samsung Electronics [005930] and SK Hynix [000660] in the third quarter of this year is expected to fall below the consensus (market average forecast).

Researcher Su-rim Lee said, “The operating profit of memory companies in the third quarter is expected to be 104 trillion won for Samsung Electronics and 70 trillion won for SK Hynix.”

This is only a 16% increase compared to the previous quarter and is below the current market consensus (KRW 111 trillion for Samsung Electronics and KRW 78 trillion for SK Hynix).

Researcher Lee said, “The main cause is the impact of the won/dollar exchange rate, which fell by about 11% compared to the end of the second quarter.”

In addition, he explained, “In addition, Samsung Electronics reflected the increased cost of MX (mobile experience) and temporary costs of video displays and home appliances (VD/CE), and SK Hynix estimates that changes in shipment mix and sales recognition timing during the product transition to next-generation high-bandwidth memory (HBM) had some impact.”

However, the researcher added, "The shock that everyone knows is not a shock," and added, "While market expectations for the third quarter's performance have already been lowered due to the decline in the exchange rate, the increased contribution to HBM4 sales in the fourth quarter is expected to drive performance improvement."

He said, "Above all, there is a high possibility that HBM's average selling price (ASP) will rise further in 2027," and that "the increase in base die/post-process costs due to the 8-layer conversion and the rise in general-purpose DRAM prices are increasing HBM's price negotiating power."

In particular, when the number of stacking stages is changed to 8, the number of HBM stacks that can theoretically be made with the same DRAM die increases by 50%, which increases graphics processing unit (GPU) shipments, and it is important to note that the 'bottleneck' that has so far been focused on DRAM die will move to the base die and post-process.

Researcher Lee said, "TSMC's recent acceleration of 'Chip on Wafer on Substrate' (CoWoS) expansion and expansion of outsourcing, and Samsung Electronics' expansion of HBM base die front-end process allocation and acceleration of back-end process investment appear to be in response to this bottleneck movement."

He said, "Samsung Electronics is expected to re-rate as the recovery of HBM competitiveness and the value of base die internalization are highlighted, and for SK Hynix, expectations for additional shareholder returns to be revealed in the third quarter earnings announcement and recovery in fourth quarter earnings remain as stock price catalysts."

On this day, DS Investment & Securities maintained its target stock price of 530,000 won for Samsung Electronics and lowered its target price for SK Hynix from 3.1 million won to 2.64 million won, but maintained its investment opinion of 'buy'.