South Korean Broker KIS: Samsung Electronics Severely Undervalued, Target Price Raised 10% to 650,000 KRW

Samsung Electronics has released its second-quarter earnings that surpassed expectations, drawing significant market attention due to its robust profitability. Korea Investment & Securities (KIS) promptly issued a research report, raising Samsung Electronics’ target price by 10% to 650,000 KRW. The firm emphasized that the company is undergoing a fundamental business model transformation—from traditional “cycle-driven” to “order-driven”—and is currently severely undervalued.

Financial data shows that Samsung Electronics achieved second-quarter revenue of 171.5 trillion KRW, a 130% year-on-year increase. Operating profit surged to 89.5 trillion KRW, soaring 1,814% year-on-year and exceeding market expectations by approximately 5.5%. Notably, nearly all of the company’s profit was contributed by its semiconductor business, which recorded an operating profit of 89.2 trillion KRW, accounting for 99.7% of total profit.

The primary reason for the sharp profit growth lies in the rebound of memory prices, with average selling prices for DRAM rising over 40% quarter-on-quarter and NAND increasing over 60%.

KIS pointed out that Samsung’s five-year long-term supply agreements with the world’s top five hyperscale data center customers are fundamentally changing the longstanding supply-demand dynamics in the memory industry. In the past, manufacturers primarily planned capacity based on market forecasts, making them prone to cyclical volatility due to oversupply; under the new model, capacity planning will be increasingly based on customer orders.

According to plans, long-term contracts are expected to cover 60% to 70% of DRAM and NAND production capacity, with the remainder sold in the spot market to balance supply stability with pricing upside flexibility.

In the current hot area of HBM (High Bandwidth Memory), Samsung is adopting a relatively balanced strategy. Rather than blindly pursuing capacity expansion, the company dynamically adjusts the production ratio between HBM and traditional DRAM based on customer demand, placing greater emphasis on long-term supply stability and customer collaboration.

Despite significantly improved fundamentals, Samsung Electronics currently trades at a price-to-book ratio (PBR) of only about 1.3x, near historical lows. Additionally, the company reaffirmed its commitment to use 50% of annual operating free cash flow (FCF) as the basis for shareholder returns, with a clear dividend policy providing strong support for valuation. KIS believes that as profitability becomes more stable and predictable, Samsung Electronics’ medium- to long-term investment value is increasingly evident.