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Back on the growth track

3Q25 preliminary results

We raise our target price for Samsung Electronics (SEC) to W127,000 (from W111,000). We believe that rising market prices for memory products are being reflected in ASP more quickly than expected. In addition, the foundry business appears to be turning around amid narrowing losses, and newly released flagship foldable models are outperforming their predecessors despite stagnant smartphone market conditions. Overall, we believe SEC is returning to a normal growth trajectory.

For 3Q25, SEC announced preliminary revenue of W86tr (+15.3% QoQ) and operating profit of W12.1tr (+159% QoQ). By division, we estimate operating profit at W3.9tr (+17.1% QoQ) for DX, W6.5tr (+1,700% QoQ) for DS, and W1.2tr (+153% QoQ) for Samsung Display; amid across-the-board QoQ improvement, the recovery of the DS division was particularly pronounced. Overall revenue was broadly in line with expectations, but margins appear to have widened sharply due to the reduced impact of memory/foundry-related one-off expenses (recognized in 1H25).

We estimate that both DRAM and NAND bit growth exceeded guidance figures at +14.8% and +10%, respectively, driven by strong demand for server DRAM and enterprise SSDs. DRAM and NAND ASPs also likely increased 13.2% and 5%, respectively, reflecting the recent steep rise in market prices for conventional memory products. At Samsung Display, both revenue and operating profit likely improved due to new product launches by a major North American customer.

We estimate 3Q25 smartphone shipments (sell-in) at 61.3mn units (+5.7% QoQ). ASP likely rose to US$301 (+11% QoQ), aided by the launch of new foldable models. Cumulative sell-through volume of the company’s new foldables in Jul.?Aug. reached 3.15mn units, already approaching the initial quarterly sales of their predecessors. (We estimate that sales surpassed the levels of the previous generation by the end of 3Q25.) This is an encouraging performance considering the overall stagnation of the global smartphone market.

In 2026, we expect growth to pick up further, with revenue of W373tr (+15% YoY) and operating profit of W68.9tr (+85% YoY). In our SOTP valuation, we have been applying discounts of 20% and 30% to the respective target EV/EBITDA multiples of the memory and foundry segments to reflect recent business setbacks. However, both businesses have recently achieved important milestones, securing certifications and winning orders from a leading global tech firm. As SEC continues to demonstrate its competitiveness through solid earnings and yields, the rationale for the aforementioned discounts is likely to weaken.