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Major beneficiary of Nvidia’s advances

4Q25 marks start of earnings up-cycle; shareholder returns to be in focus in 2026

We maintain our Buy rating and target price of W187,000 on Samsung Electronics (SEC). Using a sum-of-the-parts (SOTP) valuation, we estimate the firm’s fair value at W1,271tr. Based on our 2026 estimates, our target price implies a P/E of 11.6x and a P/B of 2.6x, remaining below the global memory sector averages of 14.2x and 3.6x, respectively.

For 4Q25, SEC announced preliminary revenue of W93tr (+8.6% QoQ) and operating profit of W20tr (+67% QoQ). By division, we estimate operating profit at W16.7tr (+138% QoQ) for DS, W1.3tr (-62.8% QoQ) for DX, and W1.8tr (+50.4% QoQ) for Samsung Display. The memory business was the primary earnings driver (estimated profit contribution of W18tr), driven by strong price growth (+41% for DRAM, +25% for NAND).

For 2026, we look for revenue of W450tr (+35% YoY) and operating profit of W126tr (+186% YoY). We forecast memory operating profit to surge 250% YoY to W111tr, driving overall earnings growth. We project that bit growth will reach +27% for DRAM and +19% for NAND, with ASPs rising 59% and 31%, respectively.

At CES 2026, Nvidia outlined a vision that is highly favorable for SEC. The Rubin platform will mark the start of full-scale HBM4 adoption, while the Vera CPU is designed to support up to 1.5TB of LPDDR5X per system―more than triple the capacity of its predecessor (Grace). We estimate Nvidia’s 2026 LPDDR5X requirement at 3bn GB, equivalent to the memory content of more than 400mn smartphones.

Nvidia also announced the Inference Context Memory Storage (ICMS) architecture and highlighted BlueField-4 as the core processor underpinning it. By applying a BlueField-4?based Dynamo KV cache context memory management system, Nvidia can offload context memory to NVMe SSDs, expanding capacity by more than 10x vs. the roughly 1TB available from on-GPU HBM.

We estimate SEC’s average 2026 DRAM wafer capacity at 665,000 wpm, representing the largest share (41.5%) among the three major DRAM players. We estimate its NAND wafer capacity at 348,000 wpm, also representing the largest share in the industry (25.9%). With commodity memory prices expected to remain strong at least through 2026, the player with the largest capacity base stands to deliver the strongest earnings