The author is an analyst for NH Investment & Securities. He can be reached at youngryu@nhqv.com -- Ed.
Helped by limited supply from memory IDMs and inventory stockpiling at customers, ASPs have begun to rise in earnest for SEC. In 2024, SEC should narrow its technological gap with other companies in terms of advanced node processes and HBM products, while also benefiting from greater demand for general-purpose memory.
DRAM division entering the black
Samsung Electronics (SEC) is forecast to post 4Q23 sales of W71.3tn (+5.7% q-q, +1.2% y-y) and OP of W4.2tn (+74.0% q-q), with sales and OP to surpass the consensus of W70.0tn and W3.6tn, respectively. This rosy outlook is attributable to top-line expansion and loss reduction resulting from increased memory shipment and ASP growth. For 4Q23, we estimate DRAM bit supply and ASP growth at +26% and +15%, respectively, and NAND bit supply and ASP growth at +24% and +6% q-q, respectively. Although new model launch effects from its North American customer continue, related forecasts have been revised down considering recently sluggish sales and the entry of competitors.
In 2024, technological competitiveness to recover and semicon earnings to rebound in earnest
We raise our TP on SEC from W90,000 to W95,000 to reflect overall improvement in industry conditions and semicon ASP increase. Our TP is calculated by applying a target P/B of 1.7x to 2024F BPS. Currently, SEC shares are hovering around the historical average P/B of 1.4x, indicating limited valuation burden.
Supply-demand conditions are improving on the back of new product launches and restocking demand from some PC and mobile clients. In the general server segment, which has been a concern for some time, conditions should also strengthen gradually after the exhausting of inventory. In 2H24, utilization rate recovery driven by downstream industry improvement and greater demand for general-purpose memory promises to deliver sharp earnings growth for SEC. In addition, a gradual uptick in the sales portion of HBM and advanced processing products, which have been discount factors as of late, should further help to relieve market concerns.