[Click eStock] "Samsung Electronics Faces Intensifying DRAM Shortage... Target Price Maintained"

On November 19, KB Securities maintained its “Buy” investment rating and a target price of 150,000 won for Samsung Electronics, stating that “demand for DRAM is showing record-breaking strength for the first time in 30 years since the expansion of the internet in 1995.”

Kim Dongwon, Head of Research at KB Securities, said, “Currently in the fourth quarter, a severe shortage of high-capacity server DRAM and the resulting unprecedented price surge are expected to benefit Samsung Electronics.”

Kim explained, “In the fourth quarter, DRAM demand is expected to exceed supply by more than three times. Due to production cuts implemented in 2022 and 2023, expansion of production capacity focused on high-bandwidth memory (HBM), and only conservative expansion of general-purpose DRAM facilities through process conversion, there is currently a severe mismatch between DRAM supply and demand.”

Samsung Electronics’ operating profit for the fourth quarter is expected to reach 16 trillion won, up 147% year-on-year, marking the highest result in four years since the third quarter of 2021 (15.8 trillion won). In particular, fourth-quarter operating profit from the semiconductor (DS) division is projected at 12.2 trillion won, a 4.2-fold increase (up 320% year-on-year).

Kim added, “Currently, prices for high-capacity server DRAM such as 96GB and 128GB DDR5 have been raised by as much as 70% for some customers, yet they are still unable to secure sufficient quantities. This is because all three major companies have already secured DRAM demand that exceeds their supply.”

As a result, the average selling price of DRAM in the fourth quarter is highly likely to significantly exceed market expectations.

Kim noted, “A DRAM market led by suppliers such as Samsung Electronics, SK Hynix, and Micron is strengthening the price bargaining power of the three major DRAM companies and delaying fixed price negotiations. The steep rise in DRAM prices is expected to continue at least through the second half of next year.”

He added, “Next year’s operating profit is forecast to reach a record high of 82.2 trillion won, up 108% from this year, with Samsung Electronics expected to benefit from both increased HBM shipments and a surprise in general-purpose DRAM prices.”