[Click eStock] "Samsung Electronics, Timely to Increase Weight in 2Q"

On the 12th, KB Securities maintained its investment opinion of "Buy" and target price of 85,000 KRW for Samsung Electronics.

KB Securities expects that Samsung Electronics' supply reduction alone will improve supply and demand in the second half of the year. It is analyzed that from the third quarter, a conservative response to price cuts in DRAM and NAND is expected, increasing the possibility of future changes in pricing strategy. Even assuming that the semiconductor demand recovery in the second half is somewhat delayed, ▲ the supply reduction effect due to more than 20% production cuts is expected to bring DRAM and NAND supply and demand close to balance in the second half, and ▲ due to the more than 70% price decline in DRAM and NAND over the past nine months, the semiconductor cost burden for global set manufacturers has significantly decreased, allowing expectations for shipment growth due to increased adoption volume in the future.

[Image source=Yonhap News]

The scale of Samsung Electronics' DRAM and NAND production cuts, which began in earnest from May, is expected to reach 20-25%, and the production cut trend is estimated to continue until the end of this year. In particular, the meaningful production cut effect is expected to start from the third quarter, directly impacting the improvement of supply and demand for DRAM and NAND. Meanwhile, even assuming a double-digit price decline in DRAM and NAND in the second quarter due to competitors' price cuts, DRAM and NAND prices, which have already reached cash cost levels, are expected to form a bottom by the end of the second quarter. Therefore, the possibility of a price rebound for DRAM and NAND is estimated to increase in the fourth quarter.

Dongwon Kim, a researcher at KB Securities, stated, "From the second half of the year, the semiconductor sector is expected to show excess returns compared to the market due to supply and demand improvement, price decline moderation, and inventory reduction," and added, "Considering that Samsung Electronics' stock price began a full-fledged upward trend after the quarter when memory semiconductor inventory peaked since 2007, the second quarter, which is the inventory peak period, is judged to be the right time to increase weighting."

Researcher Kim also said, "Samsung Electronics' operating profit for 2023 (10.5 trillion KRW) is estimated to be divided as 12% (1.3 trillion KRW) in the first half and 88% (9.2 trillion KRW) in the second half, indicating that the scope of performance improvement is expected to expand toward the second half," and forecasted, "Samsung Electronics' stock price is expected to have higher lows toward the end of the year."