"Samsung to 300,000 won, SK hynix to 1.7 million won"... Optimism Unshaken Even by War

Samsung Electronics and SK hynix, the leading stocks in the Korean market, have been weak since war broke out in the Middle East. Even so, analysts remain optimistic. Most brokerages have raised their target prices for the two stocks this month despite the geopolitical risks. Some targets now go as high as 320,000 won for Samsung Electronics and 1.7 million won for SK hynix.
■ Targets rise even as share prices drop more than 10%
According to the Korea Exchange on the 15th, Samsung Electronics and SK hynix closed at 183,500 won and 910,000 won, respectively, on the 13th. Compared with their prices on the 27th of last month, 216,500 won for Samsung Electronics and 1,061,000 won for SK hynix, they have fallen 17.9% and 14.2% since the outbreak of the U.S.–Iran war.
However, target prices for Samsung Electronics and SK hynix are still marching higher. According to financial data provider FnGuide, only one of the 27 analyst reports on the two companies published this month lowered its target price. Hyundai Motor Securities trimmed its target for Samsung Electronics by just 500 won, from 258,500 won to 258,000 won, and that was the only cut.
Many brokerages have instead been racing to lift their targets for both companies. As of the day, the average target price for Samsung Electronics set by securities firms stood at 248,240 won, up 5.7% from the 234,660 won average at the end of last month. KB Securities went the furthest, raising its target to 320,000 won.
Kim Dong-won, head of KB Securities Research Center, explained, "We raised our target price by 33% from the previous level because we revised up this year's forecast for dynamic random-access memory (DRAM) price growth to 148%, and in turn lifted our operating profit estimates for this year and next year by 30% and 57%, respectively."
The story is similar for SK hynix. The average target price for SK hynix now stands at 1,325,600 won, higher than last month's average target of 1,292,000 won. On the 11th of this month, Daol Investment & Securities raised its target for SK hynix to 1.6 million won, while KB Securities lifted its target to 1.7 million won.
Ko Young-min of Daol Investment & Securities explained, "We are in a situation where it is hard to guess where the price rally will end, as customers' competitive demand and constrained supply conditions continue."
■ Market already looking for an earnings surprise
Brokerages are raising their target prices because earnings forecasts for both companies keep moving higher.
Analysts now expect Samsung Electronics to post 520 trillion won in revenue and 199 trillion won in operating profit this year. Those figures are up 54.3% and 339% from last year, respectively. According to WiseReport, three months ago forecasts for Samsung Electronics stood at 389 trillion won in revenue and 83 trillion won in operating profit. In just three months, the revenue estimate has jumped by 130 trillion won and the operating profit forecast has more than doubled. Yuanta Securities Korea projects Samsung Electronics' revenue at 581 trillion won this year, while Daol Investment & Securities expects operating profit of around 235 trillion won.
Kim Rok-ho of Hana Securities noted, "Earnings upgrades are substantial because prices for general DRAM are rising, and the company is also proving its competitiveness in High Bandwidth Memory (HBM), so there is no longer any reason for the stock to be undervalued." He added, "In addition, there is still potential for a separate value-up initiative using treasury shares, so the company now has earnings, valuation, and momentum all in place."
SK hynix's earnings growth trajectory is even steeper. On average, brokerages forecast SK hynix will generate 230 trillion won in revenue and 168 trillion won in operating profit this year. The securities industry expects those figures to be up 136.7% and 240.4% from last year, respectively. Some houses are even more bullish, with Hyundai Motor Securities projecting revenue of up to 306 trillion won and iM Securities forecasting operating profit as high as 198 trillion won.
Experts, however, are also leaving room for results that exceed even these elevated forecasts. Kim Dong-won said, "We estimate Samsung Electronics' operating profit for the first quarter at 40 trillion won, six times higher than a year earlier and double the previous quarter." He continued, "Second-quarter operating profit is expected to surge elevenfold year-on-year to 51 trillion won, so an earnings surprise is likely."
Chae Min-sook of Korea Investment & Securities also said, "We estimate SK hynix's DRAM operating margin at 73% in the first quarter and 76% for the full year." She added, "As earnings estimates continue to be revised upward, valuation pressure is easing."
fair@fnnews.com Reporter Han Young-joon Reporter