[Edaily Reporter Park Jung-Soo ] On the 21st, KB Securities assessed that SamsungElectronics(005930)is expected to see prolonged profit growth driven by a memory supply shortage and expanded shareholder returns.
Kim Dong-won, Head of Research at KB Securities, analyzed, “SamsungElectronics is a prime example of an undervalued stock that offers both profit growth and attractive dividends,” adding, “With a price-to-earnings ratio (PER) currently around 4x, the stock is expected to enter a phase of full-scale valuation normalization and revaluation.”
SamsungSecurities forecasts that SamsungElectronics’ operating profit will rise sharply from 33 trillion won in 2024 and 44 trillion won in 2025 to 381 trillion won this year and 575 trillion won in 2027. Given that the memory supply shortage is structurally worsening and it takes at least three years for new memory fabs to be completed and begin full-scale operations, the firm believes supply constraints are unlikely to be resolved in the short term.
In particular, the firm noted that hyperscalers are favoring five-year long-term supply agreements (LTAs) as their standard contract format to ensure stable memory procurement. With an increasing number of cases where clients are requiring one-year rollover options in addition to the standard five-year contract, the firm believes the memory supply-demand balance is likely to remain tight for the next several years.
The firm also expects the company to set a new record for quarterly earnings in the third quarter. KB Securities estimates SamsungElectronics’ third-quarter operating profit at 112 trillion won, an 817% increase year-over-year. With an operating margin of 55%, the firm forecasts that the company will set a new record for operating profit for the fourth consecutive quarter since the fourth quarter of last year.
The firm expects third-quarter operating profit margins for memory to rise to 83% for DRAM and 71% for NAND, up from 78% and 68%, respectively, in the second quarter. For the foundry business, the firm forecasts a return to profitability for the first time in four years since 2022—excluding costs such as provisions for performance-based bonuses—as the recent 15% price hike and the full-scale mass production of 4-nanometer (nm) LPU take effect.
The possibility of expanded shareholder returns was also cited as a factor for stock price revaluation. If SamsungElectronics applies its existing policy of allocating 50% of cumulative free cash flow (FCF) from 2024 to 2026 to shareholder returns, the size of the special dividend within the year—based on remaining funds—is estimated to exceed at least 100 trillion won.
“If the proportion of cash dividends within the special dividend increases, the high dividend yield will come into focus, and SamsungElectronics’ stock price could stabilize in the 300,000 won range in the short term,” said Kim, adding, “Along with strong profit growth, the capacity for expanded shareholder returns is also rapidly increasing.”