Even After Cutting Its Earnings Outlook, Samsung Electronics Remains a “600,000-Won Samsung Electronics” Stock... The 80 Trillion Won Drawing Analysts’ Attention

[Financial News] KB Securities maintained its 600,000-won target price for Samsung Electronics despite lowering its operating profit forecasts for this year and next year. The brokerage said additional dividends and share buybacks and cancellations within the year could drive a revaluation of the stock, even after adjusting its earnings estimates. Its focus was on the 80 trillion won in remaining shareholder-return funds after assuming 30 trillion won in cash dividends for the third and fourth quarters.
According to KB Securities on the 4th, its operating profit estimate for Samsung Electronics this year was lowered by 3.6% to 368.1 trillion won, while next year’s estimate was cut by 3.5% to 555.4 trillion won. The brokerage maintained its “buy” rating. The 600,000-won target price is 140% higher than the previous day’s closing price of 250,000 won.
Kim Dong-won, head of the Research Division at KB Securities, stated, “Even after the 30 trillion won in cash dividends for the third quarter, additional shareholder returns—including share buybacks and cancellations and cash dividends—are expected within the year from the remaining 80 trillion won in funds.”
Assuming 110 trillion won in remaining shareholder-return funds for 2024–2026, the calculation indicates that 30 trillion won in the third and fourth quarters and 40 trillion won in the fourth quarter could be used for cash dividends, with the remaining 40 trillion won allocated to share buybacks and cancellations. The 70 trillion won in cash dividends is a scenario based on the application of separate taxation on dividend income and meeting the 25% payout-ratio requirement; it is not an amount finalized by the company. KB Securities expects the dividend yield based on second-half cash dividends to exceed 4% in this case.
Regarding the shareholder-return policy for 2027–2029, which will be disclosed in the future, Kim explained, “The possibility remains open that a policy returning at least 50% of free cash flow to shareholders could be presented.”
Second-half operating profit was estimated at about 221 trillion won. By quarter, operating profit was forecast at 104 trillion won in the third quarter and 117.3 trillion won in the fourth quarter, exceeding an average of 100 trillion won per quarter. If these estimates hold, Samsung Electronics will set a record for five consecutive quarters, from the fourth quarter of last year through the fourth quarter of this year.
For the foundry business, KB Securities expects the full-scale mass production of LPU on the 4-nanometer process and the stabilization of production yields beginning in the third quarter of this year to contribute to improved profitability. Excluding provisions for performance incentives, the analysis said, the likelihood of a return to profitability has increased.
The brokerage also viewed positively the sharp increase in demands for five-year long-term supply contracts from Chinese companies such as Baidu, Alibaba Group, and Tencent Holdings, following major U.S. cloud companies including Google and Amazon.com. As the proportion of long-term memory contracts grows, Samsung Electronics could make capital investments tailored to demand from each customer, potentially improving the predictability of its medium- to long-term earnings.
Kim said, “Given the structural constraint that it takes more than three years from the completion of a new memory production line to full-scale mass production, the memory supply shortage is expected to continue until at least 2028.” He added, “If additional shareholder returns within the year and a stronger direction for the next three-year shareholder-return policy become more concrete, earnings improvement and large-scale shareholder returns will coincide.” He emphasized, “The stock is expected to enter its strongest revaluation phase since quarterly dividends began in 2017.”

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