Disclaimer: This article is for informational purposes only and does not constitute financial advice.
📌 Key Research Highlights
- Broker: iM Securities | Rating: Buy (Initiation)
- Target Price: 370,000 KRW (~$272.8 USD based on 1356 KRW/USD)
- Core Thesis: Valuation is currently depressed due to excessive market fears of a deep 2028 downcycle; however, HBM growth and Long-Term Agreements (LTAs) provide a significant earnings floor and long-term upside.
- Upside Potential: If market confidence in earnings sustainability extends to 2028, the target price could expand to 560,000 KRW (~$413 USD).
Investment Thesis and Target Price
iM Securities initiates coverage of Samsung Electronics with a Buy rating and a 12-month Target Price of 370,000 KRW (~$272.8 USD). This valuation is derived by applying a target P/B multiple of 2.3x to the 2027E Book Value Per Share (BPS). The 2.3x multiple represents the +2 standard deviation (SD) of the average P/B over the past 25 years (since 2000).
The analyst notes that the company’s Return on Equity (ROE) for 2026E, 2027E, and 2028E is projected at 56%, 59%, and 48% respectively, significantly exceeding the 25-year historical average of 22%. If the market gains conviction regarding the sustainability of these earnings, the valuation horizon may shift to 2028, potentially opening the target price up to 560,000 KRW (~$413 USD) based on 2028E BPS.
Earnings Estimates and Financial Preview
The report forecasts aggressive growth in both revenue and operating profit through 2028. Key consolidated financial estimates are as follows:
- 2026E: Revenue of 715,612 billion KRW (~$527.7B USD) and Operating Profit of 387,573 billion KRW (~$285.9B USD).
- 2027E: Revenue of 973,263 billion KRW (~$717.7B USD) and Operating Profit of 629,945 billion KRW (~$464.6B USD).
- 2028E: Revenue of 1,168,510 billion KRW (~$861.8B USD) and Operating Profit of 749,955 billion KRW (~$553.1B USD).
Divisional Revenue Breakdown (2026E):
- DS Division: 531,042 billion KRW (~$391.8B USD)
- DRAM: 366,711 billion KRW (~$269.9B USD)
- NAND Flash: 138,358 billion KRW (~$102.0B USD)
- S.LSI/Foundry: 26,477 billion KRW (~$19.5B USD)
- DX Division: 197,954 billion KRW (~$146.0B USD)
- SDC: 30,472 billion KRW (~$22.5B USD)
Key Semiconductor Drivers and Catalysts
1. Stress Test and LTA Resilience: The analyst conducted a scenario analysis based on Micron’s commentary. Results suggest that incentives for customers to terminate Long-Term Agreements (LTAs) would only emerge if DRAM prices dropped to approximately 60% of the 4Q27 peak. Considering qualitative factors like priority allocation in the next shortage, the actual probability of LTA termination is judged to be even lower.
2. HBM Re-rating and Volatility Reduction: The shift toward High Bandwidth Memory (HBM) is expected to lower earnings volatility. Specifically, custom HBM (cHBM) is produced based on customer orders with pre-determined volumes and prices, eliminating spot market exposure.
- HBM Revenue Growth: Projected to increase from 28 trillion KRW (~$20.6B USD) in 2026 to 215 trillion KRW (~$158.5B USD) by 2028.
- Valuation Impact: Applying TSMC’s historical P/E multiples to Samsung’s HBM operating profit suggests that by 2028, the value of the HBM business alone could account for 108% of the company’s current market capitalization.
3. Shareholder Return Policy: A critical inflection point is expected in January 2027 with the announcement of a new shareholder return policy. The analyst assumes a return of 50% of Free Cash Flow (FCF) from 2027-2029 (70% dividends, 30% buybacks/cancellations), which could result in a shareholder return yield of approximately 15% based on current stock prices.
🔗 Original Source: View the official filing/article here.