Analyst Note| Kazunori Ito |
We revise our earnings forecasts and trim our fair value estimates for Samsung Electronics and SK Hynix to KRW 74,000 from KRW 79,000 per share (and to USD 1,600 from USD 1,700 per GDR), and to KRW 140,000 from KRW 155,000 per share, respectively. Although September earnings numbers for these two companies were solid, we believe DRAM pricing has hit a peak this summer and started to decline earlier than we had anticipated. Therefore, we revise our memory pricing assumptions for the December quarter and for the full year 2022, while we broadly maintain our bit growth assumptions. As a result, our forecast for Samsung’s 2022 operating margin for the semiconductor business is revised to 31.7% from 36.8%; and similarly, our forecast for SK Hynix’s companywide operating margin is revised to 31.3% from 37.1%. Meanwhile, given the suppliers’ lower inventory level and disciplined capital expenditure plan, we expect that the pace of DRAM price declines will slow down in the second half of 2022 along with the demand matching to supply. Based on this outlook, we believe that the decline in SK Hynix’s share price over the past few months is too pessimistic, while we think Samsung’s shares are fairly valued.