KB Defies Chip-Peak Calls With Bullish Samsung, SK Hynix Reports After 49% Slide

KB Securities Forecasts Samsung Electronics, SK Hynix Operating Profit at 964 Trillion Won ($694.5 Billion) Next Year

Large Shareholder Returns Seen Driving Valuation Rerating

Samsung Electronics, Down 49% From Its Peak, Seen Entering an Uptrend

As calls spread across the brokerage industry that semiconductors have peaked, KB Securities has released a pair of sharply bullish reports on Samsung Electronics and SK Hynix. The firm argues the memory market is entering an extended supercycle, driven not by a typical boom-and-bust pattern but by persistent supply constraints. The stance has drawn attention as other brokerages continue to cut their target prices.

Samsung Electronics, SK Hynix Seen as Deeply Undervalued

According to the financial investment industry on Aug. 15, Kim Dong-won, head of research at KB Securities, said in a recent report that combined operating profit at Samsung Electronics and SK Hynix will surge from 91 trillion won ($65.5 billion) last year to 641 trillion won ($461.9 billion) this year and 964 trillion won ($694.5 billion) next year, approaching 1,000 trillion won. He projected 382 trillion won ($275.4 billion) for Samsung Electronics and 259 trillion won ($186.5 billion) for SK Hynix this year, followed by 575 trillion won ($414.7 billion) and 389 trillion won ($280.5 billion), respectively, next year.

Kim wrote that Samsung Electronics' third-quarter operating profit will jump 817% from a year earlier to 112 trillion won ($80.8 billion), with an operating margin of 55%. That would mark a fourth straight quarter of record earnings after 20 trillion won ($14.4 billion) in the fourth quarter of last year. He estimated SK Hynix's third-quarter operating profit at 77 trillion won ($55.5 billion), up 579% from a year earlier, with an operating margin of 78%.

He attributed the outlook to the rapid expansion of five-year long-term supply agreements with hyperscalers, or large cloud companies. With more than 60% of total memory output already committed, memory prices are also poised to rise, he said.

KB Securities said the two stocks are trading at extremely depressed levels relative to their earnings outlook. Kim said next year's estimated operating profit is set to increase 13.2-fold for Samsung Electronics and 8.2-fold for SK Hynix from last year. Yet as of the Aug. 12 close, their 2027 price-to-earnings ratios stood at just 3.7 for Samsung Electronics and 3.2 for SK Hynix, indicating that the expected improvement in earnings next year has not been reflected in the share prices.

Kim said new shareholder return policies due to be announced soon by Samsung Electronics and SK Hynix could trigger both a valuation rerating and stock gains, similar to the case of Taiwan Semiconductor Manufacturing Co. As medium- to long-term demand for the shares strengthens, that rerating could gather pace, he added.

Large-scale shareholder returns could also help attract global sovereign wealth funds and other long-term institutional capital, including Temasek and Abu Dhabi Investment Authority. That would reinforce the shareholder base over the medium to long term and support a broader valuation rerating, according to the report.

Samsung Electronics Share Correction Seen as Over

In a separate report published on Aug. 12 on Samsung Electronics' shareholder return policy, Kim said the stock had fallen 49% from its peak, pushing its 12-month forward price-to-earnings ratio down to 4.0 times. He said the correction was nearing an end and the stock was preparing to enter an upward trend.

One reason, he said, is that OpenAI, which is preparing for a listing, could raise significant capital through an initial public offering as early as this year. That could ease concerns that had weighed on the market over AI-related financing rotation and the durability of investment spending.

He also said much of the excessive margin-backed positioning that drove Samsung Electronics' steep share-price drop in June and July has already been unwound. In his view, the short-term correction driven by investor flows has largely run its course. A large shareholder return program due to be announced soon could also act as a powerful catalyst for further gains.

KB Securities said the memory shortage will persist for at least three years through 2028. Kim said big tech customers' memory demand fulfillment rate stood at only about 60% this month, meaning supply tightness is worsening. Unmet demand this year that exceeds available supply will roll into next year, and demand that cannot be met next year could be pushed out again to 2028.

At the same time, completing a new memory production line takes at least three years, making a rapid supply increase unrealistic. On that basis, the supply shortfall is set to continue through 2028, he said.

KB Securities' analysis has drawn attention because it comes as the semiconductor-peak thesis has recently gained traction among investors following Samsung Electronics and the broader chip sector. Kiwoom Securities recently cut its target price on Samsung Electronics to 350,000 won ($252) from 390,000 won. Mirae Asset Securities lowered its target to 370,000 won ($267) from 550,000 won, Shinhan Securities to 450,000 won ($324) from 590,000 won, and Samsung Securities to 400,000 won ($288) from 500,000 won.

An industry official said KB Securities' unusually bullish stance reflects Kim's long track record of following the memory market and the earnings of Samsung Electronics and SK Hynix, as well as identifying turning points in the cycle. The official added that the latest report is based less on simple optimism than on a view that the memory market is facing an extended period of severe supply constraints rather than a standard cyclical repeat.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com