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Strong medium/long-term visibility

High profitability to be sustained

We maintain our target price of W400,000 for Samsung Electronics (SEC). Our valuation is based on a sum-of-the-parts (SOTP) methodology and implies a 2026F P/B of 3.9x, below the memory sector average of 5.7x. While the firm’s average ROE over the past decade was only 13%, we forecast average ROE in 2026?28 at 43%, which we believe justifies a higher P/B multiple.

Long-term order backlogs at AI data center companies have recently surged, increasing the need for stable component supply. Unlike previous memory cycles, which were characterized by recurring volatility due to unpredictable demand, the next three years are likely to be supported by elevated memory price levels and a growing mix of long-term supply agreements. This, in turn, should support more stable capex and shareholder return policies, as well as elevated returns on capital.

For 2Q26, we look for operating profit of W74.5tr (+30.2% QoQ), supported by DRAM and NAND ASP growth of +23% and +30%, respectively, and bit growth of +7% and +3%, respectively. We project full-year operating profit at W329tr for 2026 and W445tr for 2027. We also expect SEC to meet its minimum dividend payout target of 25% in 2026, implying a dividend yield of 3.8% (5.6% for preferred shares).

Sharp rise in long-term order commitments across the AI value chain

AI cloud provider CoreWeave saw a sharp increase in its 1Q26 backlog (US$99.4bn; +49% QoQ). Even more striking than the growth rate is the backlog’s absolute scale―equivalent to around 50x the firm’s 1Q26 revenue of US$2.1bn (+32% QoQ). To fulfill this backlog, the company plans to invest up to US$35bn in capex in 2026 (+135% YoY).

Google Cloud and Amazon Web Services also saw their 1Q26 backlogs surge to US$468bn (+93% QoQ) and US$365bn (+49% QoQ), respectively, equivalent to 23x and 10x their quarterly revenues. These massive backlog levels help explain why big tech and AI cloud companies have continued investing aggressively despite sharp near-term declines in free cash flow.

Expanding long-term backlogs at data center customers should increase the importance of securing stable long-term memory supply. Notably, after signing three long-term supply agreements in 1Q26, SanDisk disclosed a US$41.6bn backlog, equivalent to 28x its quarterly data center segment revenue (US$1.5bn). SEC is also understood to be engaged in similar discussions, though the scale of potential agreements may differ.