"Samsung Electronics at 190,000 Won, SK hynix at 900,000 Won"... Expert Outlines Downside Scenario Amid Semiconductor Correction

Downside Scenario Based on Historical Low PBRs
"Samsung Electronics Could Fall to 190,000 Won and SK hynix to 900,000 Won"
"Don't Rush to Cut Losses... Stocks Could Break Previous Highs Within 3-4 Years"

As share prices of Samsung Electronics and SK hynix, South Korea's leading semiconductor stocks, have recently undergone a correction, experts have advised investors to secure cash and wait for an opportunity to buy more rather than rushing to cut losses on their holdings. Under a downside scenario using low price-to-book ratios (PBRs), Samsung Electronics could fall to around 190,000 won and SK hynix to around 900,000 won. However, given the semiconductor industry's three- to four-year cycles, in which stocks eventually break through their previous highs, the advice is to take a long-term perspective.

KOSPI, KOSDAQ and the won-dollar exchange rate are displayed on a board at Hana Bank’s dealing room in Jung-gu, Seoul, on the 3rd, as the KOSPI opened lower. Yonhap News Agency.

Applying Low PBRs Puts Samsung Electronics at 190,000 Won and SK hynix at 900,000 Won

Park Se-ik, CEO of Chesley Investment Advisory, appeared on the YouTube channel "Buiknam TV" on November 1 to discuss investment strategies for major semiconductor stocks and their outlook. Referring to the fact that a substantial portion of foreign investors' recent net sales of South Korean stocks was concentrated in semiconductors, Park said foreign investors tend to take advantage of semiconductor companies' earnings and market sentiment in the opposite direction.

"Based on their long experience, foreign investors sell when semiconductor companies are reporting record-high earnings and come in when the market is pessimistic," he said. "They want to buy cheap. If prices are high, they sell."

Park used PBRs and book value per share (BPS) to assess the downside potential for Samsung Electronics and SK hynix. Assuming Samsung Electronics' BPS this year is about 110,000 won and its share price is 370,000 won, its PBR would be about 3.4 times. Given that Samsung Electronics' PBR historically ranged from 1.1 to 2.1 times, Park said the current share price reflects high expectations.

For SK hynix, assuming a BPS of about 500,000 won this year and a share price of 3 million won, its PBR would be about 6 times. This indicates a high current valuation compared with its historical PBR range of 0.9 to 1.6 times.

Based on these figures, Park presented a downside scenario applying PBRs at historical lows. If Samsung Electronics' BPS at the end of next year is about 170,000 won, applying its historical low PBR of 1.1 times would put its share price at about 187,000 won. He cited this as the basis for the possibility that the stock could fall to around 190,000 won.

For SK hynix, applying its historical low PBR of 0.9 times to an estimated BPS of 1 million won next year yields about 900,000 won. These figures are downside scenarios based on assumptions about BPS and PBR, however, and do not represent definitive target prices or prices the stocks will necessarily reach.

Be Cautious About Selling at a Loss and Buying Back; Semiconductors May Recover in Three- to Four-Year Cycles

Park also cautioned against selling holdings at a loss during a downturn in the hope of buying them back at a lower price. Since it is difficult to actually buy when market pessimism intensifies, he said it is important to secure cash and wait for an appropriate buying opportunity rather than selling hastily during a downturn.

He noted that earnings and share prices in the semiconductor industry do not necessarily move in the same direction. As an example, he cited a period when SK hynix recorded losses in the 9 trillion won range, while the value of its assets helped support its share price.

"Demand for semiconductors does not decline, so their stocks break through previous highs again every three or four years," Park said. "Prices rise and fall depending on supply, causing semiconductor prices and share prices to fluctuate. So, after three or four years, Samsung Electronics and SK hynix will both break through their previous highs."

General-Purpose Memory and HBM Are Separate Markets; Supply Outlooks Differ

Risks to the semiconductor industry's outlook include expanding production capacity among Chinese memory makers and funding pressures facing neocloud companies. If China's ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies (YMTC), among others, increase production, pressure from general-purpose memory supply could grow. There are also concerns that if neocloud companies' capacity to invest weakens, this could affect investment in artificial intelligence (AI) infrastructure.

Park emphasized, however, that general-purpose memory and the high-bandwidth memory (HBM) market should be viewed separately. He forecast that supply shortages of specialized memory such as HBM could continue through 2028-2029, driven by active investment in AI infrastructure by major U.S. and Chinese technology companies. He also said that expanding long-term agreements (LTAs) could reduce earnings volatility for memory companies.

"When we talk about HBM, we call it specialty memory. Major technology companies in the United States and China continue to invest aggressively in it, so there could continue to be supply shortages," Park said. "Even if prices remain stable only in the HBM segment, it would reduce the noise surrounding the semiconductor cycle."

Park cited around 210,000 won for Samsung Electronics and 900,000 to 1.2 million won for SK hynix as price ranges at which foreign investors might buy back shares. These are estimates of price ranges that could attract foreign buying, however, and do not mean that purchases are certain to take place at those prices.

Additional Buying in the Second Half of 2027; Focus on Securing Cash for Now

Park's central strategy was to secure cash and watch market conditions rather than buy more immediately. He said investors should treat the market as an opportunity to add to their holdings when concerns about deteriorating earnings materialize, securities firms lower their target prices, and investor sentiment weakens sufficiently.

"Rather than aggressively averaging down from now on, you should keep building up your cash," he said. "It's right to buy more when earnings shocks emerge, securities firms cut their target prices, and investor sentiment is completely at rock bottom."

Park identified the second half of 2027 as the time to begin buying more in earnest. He also advised investors to take a long-term approach to their existing holdings in Samsung Electronics and SK hynix, rather than rushing to sell in response to short-term price fluctuations. "If you're stuck holding Samsung Electronics and SK hynix shares, think of holding them for three years," he said.

He also suggested broadening investment options to other industries and markets while major semiconductor stocks are underperforming. Investors could look at semiconductor materials, components and equipment companies, major KOSDAQ sectors, and other industries such as shipbuilding, defense, nuclear power, aesthetic dermatology and entertainment. Investing in related indexes such as the KOSPI 200 or KOSDAQ 150 was also mentioned as an option.

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