Shares of Samsung Electronics and SK Hynix surged more than 5 percent and 9 percent, respectively, in early trading Thursday, as brokerages at home and abroad raised their target prices for both chipmakers on expectations that a "structural supply shortage" in the memory chip market will persist for the foreseeable future.
According to Korea Exchange, both companies broke back above the 360,000 won ($243) and 2,800,000 won levels, respectively, in early trading Thursday.
Samsung Electronics and SK Hynix had closed the previous session up 9.84 percent and 0.98 percent, respectively, and continued pushing higher Thursday.
The gains were largely attributed to US memory chipmaker Micron's surprise earnings beat overnight, which reaffirmed the growth trajectory of the semiconductor sector.
Both stocks remain below their all-time highs of 374,500 won and 2,945,000 won, respectively, but analysts expect a sharp rally to continue.
KB Securities raised its target price for Samsung Electronics on Thursday to 550,000 won from 530,000 won.
Kim Dong-won, head of research at KB Securities, said a meaningful earnings recovery driven by rising memory chip prices is coming into view, and that a full-scale revaluation of the stock is expected to follow.
Kim said second-quarter memory chip prices are set to rise more than 50 percent, led by server DRAM and enterprise solid-state drives, far exceeding market expectations. He forecast Samsung's second-quarter operating profit at 90 trillion won, a 19-fold increase from a year earlier.
KB Securities projected Samsung's full-year operating profit at 375 trillion won, a 761 percent jump from last year, and forecast 548 trillion won for next year.
Kim also said a listing of Samsung Electronics' American depositary receipts is emerging as a strong capital policy option to broaden access for global investors, adding that related discussions are expected to intensify going forward.
He cited large-scale shareholder return measures — including share buybacks and special dividends — as additional positive factors as they become more concrete.
Daol Investment & Securities had earlier raised its target price for Samsung Electronics to 585,000 won, Korea Investment & Securities to 570,000 won, and Eugene Investment & Securities to 560,000 won.
Japan's Nomura Securities drew particular attention by sharply raising its Samsung Electronics target price from 590,000 won to 670,000 won — the highest target price set by any brokerage for the stock.
Expectations for SK Hynix are also climbing. Mirae Asset Securities raised its target price for SK Hynix sharply Thursday, to 4.2 million won from 3.8 million won.
Kim Young-geon, a researcher at Mirae Asset Securities, said the firm kept its earnings outlook for this year unchanged but raised its forecast for SK Hynix's operating profit next year to reflect expectations of higher HBM prices.
Mirae Asset Securities lifted its forecast for HBM price growth next year to 43.7 percent from 25.3 percent, and projected SK Hynix's operating profit next year at 449 trillion won.
On SK Hynix's announcement the previous day of plans to issue up to 45 trillion won worth of ADRs in the United States, Kim said he expects the listing to open the door to inclusion in the Philadelphia Semiconductor Index, known as the SOX.
"Based on the offering price, the market cap of $30 billion would rank 25th within the SOX index," Kim said. "With 179 million shares to be listed at a 1-to-0.1 issuance ratio, the trading volume requirement should also be met without difficulty." He forecast the company would be added to the index at the regular rebalancing in September next year, projecting an inflow of global funds tracking the SOX.
This month, Hanwha Investment set a target price of 4.3 million won for SK Hynix and Daol Investment & Securities set one at 4.2 million won, both above the 4 million won mark. Nomura Securities had previously set the highest target price among brokerages at 5 million won.
The string of target price upgrades has turned investor attention toward a market cap race between the two companies, which have recently been locked in a tight contest for the top spot on the Kospi.
Based on Wednesday's closing prices, Samsung Electronics' market cap — measured by common shares — stood at about 1,990 trillion won, while SK Hynix's was about 1,838 trillion won, a gap of roughly 151 trillion won.
On Thursday morning, SK Hynix's shares surged on news of the ADR issuance plan, narrowing the gap. As of 9:30 a.m., Samsung Electronics' market cap stood at around 2,110 trillion won and SK Hynix's at around 2,023 trillion won, cutting the difference to roughly 87 trillion won.
jiyun@heraldcorp.com
