Mirae Asset Securities logo

Stay focused amid heightened concerns

Maintain Buy rating and TP of W370,000

We maintain our Buy rating and target price of W370,000 on Samsung Electronics (SEC). Despite an unprecedented level of shareholder returns, the stock has come under excessive pressure amid macro uncertainty. Valuation has fallen back to pre-AI-boom levels, with the stock trading at a 12-month forward P/B of 1.7x and P/E of 4.3x. However, there have been few meaningful changes in the business environment or industry outlook.

Amid heightened market uncertainty, highly visible shareholder returns provide an important anchor. On Aug. 21, SEC announced that its shareholder returns for 2026 are likely to total W90?110tr. It plans to pay around W30tr in cash dividends in 3Q26, with the remaining returns to be finalized at a board meeting in Jan. 2027. Based on the Aug. 24 closing price, the upper end of the 2026 shareholder return estimate would imply a dividend yield of 8.3% for common shares and 11% for preferred shares.

We keep our operating profit forecasts unchanged at W120tr for 3Q26, W126tr for 4Q26, and W559tr for 2027. We expect DRAM supply/demand conditions to remain tight through 2028. Led by HBM price increases, we expect overall DRAM ASP to grow 15% in 3Q26, 5% in 4Q26, and 22% in 2027. With more than half of revenue now covered by long-term agreements, earnings volatility is also declining.

We visited seven semiconductor firms in China during Aug. 17-22. AI infrastructure demand in China is soaring, and our meetings indicated that the key driver of demand has shifted from government subsidies to actual demand from cloud service providers (CSPs) and AI model developers. Growing adoption of Chinese-made AI accelerators is translating directly into strong HBM demand in the country.

However, China’s ability to meet its HBM needs domestically appears lower than expected. Based on the assessments of local accelerator makers, China remains roughly two years away from achieving self-sufficiency in HBM3-class products. With domestic supply unable to keep pace with surging demand, CXMT will have little choice but to expand HBM production. Given that HBM consumes nearly 4x as much capacity as conventional DRAM, we believe the risk of China-driven oversupply in the broader DRAM market is limited.

At Hot Chips 2026, SEC unveiled a three-stage road map for custom HBM. The road map calls for migrating the memory controller from the XPU to the base die (which uses the 4nm process). SEC also presented its Heat Path Block (HPB) technology, which it says can reduce peak temperatures by 35%. The final stage is zHBM, a concept architecture that eliminates the interposer by stacking HBM directly on top of the XPU. SEC projects that zHBM will reduce DRAM power consumption by around 70%, freeing up approximately 100W for additional GPU compute. zHBM requires hybrid bonding at pitches of 6μm or less and integrated memory-SoC design, placing it in technologically uncharted territory. With in-house capabilities spanning memory, leading-edge foundry processes, and advanced packaging, SEC is uniquely positioned to develop/produce the technology internally. We believe shareholder returns will provide firm downside support, while SEC’s technological edge in custom HBM should ultimately drive a valuation re-rating.