"Too Cheap Now"... With Samsung Electronics and SK hynix Down 40%, Securities Firms Point to a Reversal Trigger

Temasek and Abu Dhabi Investment Authority: Attracting Global Long-term Investors

Securities industry analysts have forecast that the earnings outlooks for Samsung Electronics and SK hynix have risen significantly, and consequently, the share prices of these two companies—which have dropped by over 40% from their peaks—are expected to be re-evaluated.

Stock Prices Have Fallen Over 40%... But PER is Only 3x

Recently, Kim Dongwon, Head of Research at KB Securities, stated, “The share prices of Samsung Electronics and SK hynix have plunged more than 40% from their recent highs due to excessive deleveraging, causing their 2027 price-to-earnings ratio (PER) to drop to about 3x. This suggests there is significant room for a future valuation re-rating.”

PER (Price-to-Earnings Ratio) is an indicator that shows how expensive a stock is relative to the company's earnings. It is calculated by dividing the market capitalization by expected net profit. If the PER is 10x, it means the company would need to generate its current level of profit for 10 years to match its market cap. Under the same conditions, a lower number indicates the stock is relatively cheap compared to its earnings.

According to KB Securities’ estimates, the PER for next year is only 3.7x for Samsung Electronics and 3.2x for SK hynix. This is because, although share prices have plunged recently, their expected earnings are projected to surge going forward.

KB Securities estimates that the combined operating profit of the two companies will soar from 91 trillion won in 2025 to 641 trillion won this year, and further up to 964 trillion won next year. Kim emphasized, “The outlook for next year’s earnings improvement is not being reflected in the current stock prices at all.” He also analyzed, “The estimated operating profit for next year for Samsung Electronics and SK hynix is 575 trillion won and 389 trillion won, respectively. This means, compared to 2025, Samsung Electronics’ operating profit is expected to surge by 13.2 times and SK hynix’s by 8.2 times in just two years.”

Over 60% of Memory Supply Already Secured... The Reason for Solid Earnings Confidence

The key drivers of the favorable earnings outlook are the expansion of global Big Tech’s investment in artificial intelligence (AI) and long-term supply agreements. As hyperscalers—large cloud and platform companies—increase their investments in AI data centers, demand for memory is rising, and Samsung Electronics and SK hynix are securing long-term supply volumes as a result.

View of SK hynix headquarters in Icheon, Gyeonggi Province Photo by Yonhap News

Kim explained, “As five-year long-term supply contracts with hyperscalers begin to take effect in earnest, over 60% of the total memory production volume has already been secured for supply, and memory prices are also expected to rise at the same time.”

The record-breaking run in quarterly earnings is also expected to continue in the third quarter of this year. Kim projected, “Samsung Electronics’ third-quarter operating profit will skyrocket by 817% year-on-year to 112 trillion won, marking four consecutive quarters of record-high earnings since the fourth quarter of 2025. SK hynix’s operating profit is also estimated to jump 579% year-on-year to 77 trillion won in the third quarter.”

Shareholder Returns Also Seen As a ‘Re-rating Card’

Another reason for expecting a share price re-rating is shareholder returns. When companies return profits to shareholders through dividends, share buybacks, or cancellations, the stock could become more attractive even with the same earnings. Kim predicted, “The soon-to-be-announced new shareholder return policies of Samsung Electronics and SK hynix are expected to drive both a valuation re-rating and a share price increase, much like what was observed in the case of TSMC.”

Samsung Electronics Suwon Headquarters in Yeongtong-gu, Suwon-si, Gyeonggi-do. Photo by Yonhap News

In particular, for Samsung Electronics, he noted, “Over the next three years, a minimum of 600 trillion won in large-scale shareholder returns and a dividend yield in excess of 7% are anticipated.” He added, “This is expected to act as a powerful catalyst, encouraging long-term capital inflows from major overseas sovereign wealth funds and global mega funds, such as Temasek and Abu Dhabi Investment Authority (ADIA).”

He continued, “With the mid- to long-term supply-demand base further solidified and a full-fledged valuation re-rating underway, additional share price appreciation is also anticipated. Our top picks are Samsung Electronics and SK hynix.”

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