"Sold During the Plunge, Now What?"... Samsung Electronics at 5.5 Million Won, SK hynix at 4.2 Million Won—Time to Buy, Not Sell? [Weekend Money]

Mirae Asset Securities: "Stock Prices Down on Outlook for Lower NAND Prices"
"However, with a 30% Drop from the Peak... Downside Factors Largely Absorbed"
Target Prices for Samsung Electronics and SK hynix Maintained
"Expanding Positions at the B

Mirae Asset Securities has analyzed that the recent decline in global memory semiconductor stocks is due to a drop in NAND prices. The brokerage notes that the downward factors have been largely absorbed by the market correction, and now represents a good buying opportunity at the current low point.

Yonhap News Agency

On July 26, Younggeon Kim, a researcher at Mirae Asset Securities, stated, "Recently, global memory semiconductor stocks have shown notable declines from their peaks. The market has attributed these losses to weaker-than-expected second quarter earnings, disruptions from leveraged financial products, and other factors. However, we see the outlook for a decline in NAND prices as the primary reason." He added, "We recommend buying at the low, as we believe the factors causing the price drop have already been sufficiently digested through this correction."

Semiconductor stocks have corrected by approximately 30 percent since their recent peak on June 20. Mirae Asset Securities points to the potential turn in memory chip prices as the main cause. According to market research firm TrendForce, the contract price of NAND is projected to decline starting in the third quarter of next year.

The main reason for the expected fall in NAND prices is an easing of supply-demand tensions. On the demand side, the bit shipment growth rate for enterprise solid-state drives (SSDs) is expected to slow from the third quarter onward. This reflects projections that the strong demand seen at this point is, in part, due to pre-emptive stockpiling.

On the supply side, new wafer production capacity expansions are expected beginning in the second quarter of next year. Samsung Electronics plans to operate its Xi’an fab, which has been upgraded to V-NAND (V9), and new fabs from Kioxia (K2 fab), SK hynix (Dalian fab), and YMTC are also scheduled to start operations. Reflecting these factors, Mirae Asset Securities forecasts a NAND supply surplus rate of 1.1 percent in the third quarter and 12.2 percent in the fourth quarter of next year. In the first quarter of this year, the supply surplus rate stood at -10.8 percent.

However, Mirae Asset Securities believes that since stock prices have already dropped by about 30 percent from recent highs, much of the impact from the potential decline in NAND prices has already been absorbed by the market. Kim said, "While further easing may occur, uncertainty over oversupply is not significant, and the new capacity planned for next year is not enough to trigger excessive oversupply in the NAND sector."

Conversely, DRAM prices are expected to continue rising through the end of next year. According to TrendForce, the contract prices for 16GB DDR4 and DDR5 are projected to each increase by 43 percent and 38 percent, respectively, by December next year compared to this month.

Yonhap News

The report also notes that Alphabet's second-quarter results warrant attention to its order backlog rather than its capital expenditures (CAPEX). Alphabet’s order backlog in the first quarter was USD 468 billion, up 92.6 percent quarter-on-quarter, and in the second quarter increased further to USD 514 billion. Kim explained, "CAPEX by Big Tech serves as a means to turn the order backlog into revenue, so as long as backlogs remain strong, continued CAPEX is inevitable." He continued, "Alphabet has indicated a meaningful increase in CAPEX in the coming year, and we anticipate this upward trend will extend to Microsoft and Amazon as well."

Based on this analysis, Mirae Asset Securities has maintained its target stock prices for Samsung Electronics and SK hynix at 5.5 million won and 4.2 million won, respectively, emphasizing that now is an optimal period for increasing holdings at the low. Kim stated, "Samsung Electronics and SK hynix have dropped approximately 26 percent and 37 percent, respectively, from their recent peaks in the past month. As a result, the 12-month forward price-to-book ratios (P/B) and price-to-earnings ratios (P/E) for the two companies have entered very low levels relative to their return on equity (ROE)—1.8 and 4.4 times for Samsung Electronics, and 2.7 and 5.1 times for SK hynix." He added, "Particularly, Samsung Electronics' current share price allows for an expected dividend yield (including basic dividends) of 7.9 percent for common shares and 11.1 percent for preferred shares."

This content was produced with the assistance of AI translation services.