Samsung Electronics and SK Hynix: Raise FVE by 5%-6%; Memory Price Increase to Moderate in 2H 2024

Following Samsung Electronics’ December quarter earnings call, we reiterate our view that memory prices will continue to rise through 2024. Major memory suppliers significantly reduced capital spending last year to protect their cash flows, and while they plan to increase spending this year from a low base, most will be allocated to high-end products such as DDR5 and HBM3/HBM3E, which consume more wafers. As a result, we forecast that industrywide supply bit growth will be limited amid a solid recovery in memory demand this year, and we expect memory prices to continue to rise in 2024 due to the tight supply. Based on the updated memory outlook, we raise our fair value estimate for Samsung Electronics to KRW 85,000 per share and USD 1,610 per GDR from KRW 80,000 and USD 1,480, and our fair value estimate for SK Hynix to KRW 147,000 per share from KRW 140,000. We believe that Samsung’s shares are slightly undervalued, while SK Hynix's shares are fairly valued.