[Click eStock] "Samjeon, DS Division Likely to Underperform Next Year... Target Price Down"

On the 10th, Kiwoom Securities downgraded the target price for Samsung Electronics from 75,000 KRW to 73,000 KRW, maintaining a 'Buy' rating, citing expectations that the DS division's operating profit in 2025 will fall short of market consensus.

Researcher Park Yu-ak stated, "We expect Samsung Electronics' DS division operating profit in 2025 to be 19.2 trillion KRW and the company's total operating profit to be 39.5 trillion KRW, both below market consensus," adding, "This is due to anticipated larger-than-expected declines in memory prices and foundry utilization rates."

Specifically, he explained, "DRAM is expected to record results below forecasts at the end of this year and early next year due to delays in mass production supply of HBM3e for Nvidia, low-priced DDR4 sales by China's CXMT, and worsening supply-demand conditions for general-purpose DRAM," and added, "Additional US sanctions against China could act as a short-term negative factor for Samsung's HBM business targeting China."

Regarding NAND, he noted, "There is a steeper price decline than our conservative expectations due to weak consumer device demand and intensified competition among suppliers," and forecasted, "In 2025, Samsung is expected to mass-produce 8th and 9th generation V-NAND to reduce costs, but due to worsening supply-demand conditions and price declines in the industry, performance is expected to be weaker compared to this year."

On the foundry business, he said, "With further declines in utilization rates, a significant operating loss is expected in the fourth quarter of this year," and added, "Reflecting this, Samsung Electronics' 2025 operating profit is projected at 19.2 trillion KRW for the DS division, a 16% increase year-on-year, and 39.5 trillion KRW for the entire company, a 12% increase, both falling short of the market consensus of 45.4 trillion KRW."

However, he emphasized that the current stock price level already reflects many concerns, suggesting a need to observe structural improvements and approach with a long-term perspective. Samsung Electronics' current valuation is at a historic low. The price-to-book ratio (PBR) has decreased from 1.5 times in 2023 to 1.0 times in 2024. The price-to-earnings ratio (PER) has also dropped from 36.8 times to 10.4 times.

Researcher Park added, "Since the stock price decline has sufficiently progressed, attention should be paid to the successful structural improvement of the DRAM business in 2025 and the potential addition of CXMT to the US entity list," recommending, "Gradually increasing exposure with a long-term view."