"Extreme Undervaluation": Brokerage Says Samsung and SK hynix Have 964 Trillion Won in Operating Profit but Trade at Just 3x PER

[Financial News] Samsung Electronics and SK hynix are expected to approach the era of 1 quadrillion won in combined operating profit by 2027. However, their price-to-earnings ratios based on expected 2027 results have fallen to around 3 times, suggesting that stock prices have failed to reflect the sharp earnings growth outlook and that the shares have entered an area of "extreme undervaluation."

On the 13th, Kim Dong-won, head of research at KB Securities, projected that the combined operating profit of Samsung Electronics and SK hynix will rise from 91 trillion won in 2025 to 641 trillion won this year and 964 trillion won in 2027. He estimated 2027 operating profit at 575 trillion won for Samsung Electronics and 389 trillion won for SK hynix.
Compared with the pace of earnings growth, current share prices are seen as remaining in an extreme undervaluation zone. Based on the closing price on the 12th, the PER reflecting expected 2027 results stood at just 3.7 times for Samsung Electronics and 3.2 times for SK hynix. The decline was driven by a more than 40% drop from recent highs, as heavily accumulated margin-financing positions were liquidated in large volumes.
Kim said, "The outlook for improved earnings next year is not being reflected in stock prices at all," adding that there is significant room for valuation re-rating.
He also expected both companies to post record quarterly results again in the third quarter of this year. KB Securities estimated Samsung Electronics' third-quarter operating profit at 112 trillion won, up 817% from a year earlier. SK hynix was forecast to post operating profit of 77 trillion won, up 579%.

As long-term supply contracts centered on hyperscalers begin to be fully reflected, more than 60% of total memory production volume has already been secured for sale. In addition, with memory prices also expected to rise on the back of tight supply and demand, the scale of earnings improvement is expected to widen further.
Expanded shareholder returns were also seen as a powerful catalyst for share-price gains. KB Securities said the new shareholder return policies that Samsung Electronics and SK hynix are expected to announce soon could help normalize their sharply depressed valuations. In Samsung Electronics' case, it estimated that at least 600 trillion won in shareholder returns could be possible over the next three years, pushing the dividend yield above 7% at current share prices.
Kim said large-scale shareholder returns could attract global sovereign wealth funds and major long-term capital, including Temasek Holdings and the Abu Dhabi Investment Authority (ADIA). He added, "As the medium- to long-term supply-demand base strengthens, valuation re-rating will begin in earnest."
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