Now is the Right Time for Long-Term Investment in Samsung Electronics and SK hynix

Samsung Electronics reported third-quarter sales of 195 trillion won and an operating profit of 107.4 trillion won, which fell short of market expectations.

Nevertheless, it achieved a record-high operating profit margin of 55.1%, reaching this figure at a time when quarterly operating profit exceeded 100 trillion won for the first time.

As the entire memory business rapidly reorganizes around HBM, existing D-RAM production capacity is being reallocated. This trend is exacerbating supply shortages in the market.

Amidst this trend, price competitiveness and profitability have improved, leading to a nine-fold increase in operating profit compared to the same period last year. The company's resources are currently focused on strengthening HBM capabilities.

The proportion of HBM within the D-RAM market is also expected to expand from 8% to 19%, with the HBM market size anticipated to exceed 100 billion dollars by 2028.

Samsung Electronics' SSD contract prices increased by 18-19%, and contract prices for CSPs (Cloud Service Providers), including SK hynix, also rose by up to 25%.

In particular, D-RAM contract prices for Chinese data centers increased by 30-40%, driving an overall rise in memory product prices.

World Trade Securities maintained Samsung Electronics' target stock price at 500,000 won, analyzing that while D-RAM and NAND bit growth rates will remain at 4% and 5% respectively, the average selling price will increase by 18-20%.

This rise in selling prices is driving margin expansion, and HBM4 sales, in particular, are expected to more than triple quarter-over-quarter, contributing to improved profitability.

The widening deficits in Samsung Electronics' non-memory divisions, including mobile, network, and VD, are offsetting the strong performance of its memory division.

This deterioration in profitability in the non-memory divisions could negatively impact the overall company's profit growth rate, according to analysis.

With D-RAM shipments projected to increase by 22% and prices by 38% in 2027, and NAND shipments by 16% and prices by 28%, along with an anticipated 103% rise in HBM prices, the likelihood of semiconductor price declines is considered low.

When analyzing the PEG of major semiconductor companies like Nvidia (0.23) and Broadcom (0.3), it is crucial to consider not just valuation but also growth potential.

Data center revenue is expected to increase 30-fold compared to 2018, and the transition from hard drives to SSDs is accelerating.

Micron holds more inventory than Apple, gaining a supply advantage, and has seen its net profit increase 42-fold over the past two years, benefiting from the explosion in demand for data center memory driven by AI proliferation.

This is leading to stronger pricing power for Micron.

SK hynix and Samsung Electronics are in a short-term adjustment phase, but their corporate profit growth has not faltered.

While a period of adjustment is necessary to digest selling pressure from rising stock prices, holding onto shares from a long-term perspective is recommended rather than hasty selling.

As long as profit and revenue do not decline, the current stock price adjustment can be utilized as an opportunity for low-price buying. As long as EPS growth is maintained, the possibility of a sharp drop or a reversal to a downward trend is low, and this period is one that requires patience for a rebound.

As long as profit and revenue do not decline, there will be no sharp drop or reversal to a downward trend, and the current period is merely a time for waiting, not an end to investment.

The current phase involves a period of adjustment as it digests selling pressure from previous highs, with 300,000 won for Samsung Electronics, 1,800,000 won for SK hynix, and 1,100 dollars for Micron acting as key breakthrough resistance levels.

If Micron breaks through the 1,100 dollar resistance level, it has the potential to rise to its previous high, and with EPS increasing for all major semiconductor companies, a long-term investment approach is necessary.

A strategy of maintaining holdings along with the trend rather than short-term trading is recommended.