Despite sharp drops in Samsung Electronics and SK Hynix... “Now is the bottom; earnings will drive a W-shaped rebound”

[Financial News] KB Securities said recent sharp declines in the share prices of Samsung Electronics and SK Hynix marked “a second bottom.” Its assessment was that the stocks had fallen only because foreign selling created a supply-demand gap and weakened investor sentiment, while the earnings outlook remained solid, underpinned by a shortage of memory chips and rising prices.
Kim Dong-won, head of research at KB Securities, said on the 14th, “We believe the share prices of Samsung Electronics and SK Hynix have formed a second bottom in the course of a W-shaped rebound since July 2026.”
Kim said, “So far this month, Samsung Electronics and SK Hynix shares have plunged 15.9% and 21.3%, respectively, bringing their valuations down to around three times earnings (PER) and 1.4 times book value (PBR). These levels are close to the undervalued territory seen in October 2025 and April last year.”
He continued, “We believe this share price correction resulted from a worsening supply-demand imbalance, as foreign investors’ cumulative net selling this year exceeded 200 trillion won, with about 12 trillion won in net sales concentrated in this month alone.” He explained, “In particular, the main driver of recent foreign selling was weakened investor sentiment amid increased volatility in macroeconomic variables such as interest rates and oil prices, rather than concerns about the semiconductor cycle or earnings.”
He expected earnings forecasts to continue their upward trend. KB Securities estimated the two companies’ combined operating profit at 626 trillion won this year and 944 trillion won next year. Its estimates for next year were 555 trillion won for Samsung Electronics and 389 trillion won for SK Hynix.
Kim explained, “Recently, the likelihood that the two companies’ combined operating profit will exceed 1,000 trillion won in 2027 has increased, and upward revisions to earnings consensus forecasts are beginning in earnest. This is because memory shortages are expected to worsen further in 2027, while prices for HBM and conventional memory are expected to rise sharply.”
Kim also explained, “Samsung Electronics disclosed that Chairman Lee Jae-yong is to receive Samsung Electronics shares worth 2.6 trillion won (0.17%) as a gift from Hong Ra-hee, honorary director of the Leeum Museum of Art.” He added, “The Samsung Electronics shares Chairman Lee acquired through off-market purchases are worth 1.9 trillion won, and the acquisition price of 250,500 won is 8.0% above the previous day’s closing price.”
He added, “This is a signal supporting the view that the shares are undervalued and that their current price does not fully reflect the company’s medium- to long-term growth prospects and potential for earnings improvement.”
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