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Sharp pullback presents an opportunity

Reaffirm TP despite sharp pullback

Following the start of US strikes on Iran, shares of Samsung Electronics (SEC) have fallen 20.5% (as of the Mar. 4 close). This exceeds the 18.4% drop in the KOSPI during the same period and is roughly five times larger than the fall in the PHLX Semiconductor Sector Index (-4.1%). Given that geopolitical risks are not materially impairing the firm’s fundamentals, we view the recent decline as a typical panic-driven sell-off.

Although uncertainty remains, we maintain our target price at W275,000 and believe that current levels present a buying opportunity. Valuation has become significantly more attractive, memory prices remain stable (limiting earnings downside), and tight supply/demand conditions in the memory market are likely to persist.

Stable memory prices and solid earnings outlook

Following the sharp pullback, SEC’s 12-month forward P/E and P/B have fallen to 5.4x and 1.8x, respectively. As earnings forecasts remain unchanged, the sell-off purely reflects valuation compression. The P/E remains well below the historical average of 7.3x, and P/B has fallen below the previous high of 2x recorded in Dec. 2020.

Despite the sharp share price decline, memory prices remain highly stable. On Mar. 4, DRAM spot prices (16Gb) were little changed, closing 0.08% higher for DDR5 and 0.25% lower for DDR4. Since the airstrikes, DDR5 and DDR4 prices have declined only 0.8% and 3.4%, respectively. This resilience reflects two factors: 1) most demand now comes from big tech customers, making it structurally insulated from geopolitical shocks; and 2) consumer IT devices are already projected to see historically steep shipment declines, limiting further downside risk.

Notably, supply chain uncertainty could encourage customers to raise their safety stock levels while also prompting a more cautious capex approach among suppliers. Based on 2026 projections, wafer capacity expansion―forecast at +8.5% for DRAM (net addition of 202,000; +10.6%) and -1% for NAND (net addition of 42,000; +3.1%)―already lags projected memory bit growth (+24.8% for DRAM, +14.8% for NAND).

We maintain our operating profit forecasts at W37.4tr (+86% QoQ) for 1Q26 and W227tr (+419% YoY) for 2026 and see a high likelihood that the stock will recover as the earnings reporting period approaches. While the effective closure of the Strait of Hormuz could lead to higher logistics costs for the home appliance business, this division represents only 0.5% of total operating profit.