Korea Investment raises Samsung Electronics, SK hynix targets against market tide

As concerns mount over a slowdown in the semiconductor industry, domestic brokerages have been cutting their price targets for Samsung Electronics and SK hynix one after another. Amid that trend, Korea Investment & Securities has stood apart by sharply raising its targets for both companies, drawing attention with an outlook that runs counter to the broader market.

According to the financial investment industry on Saturday, Korea Investment & Securities recently lifted its price target for Samsung Electronics to 650,000 won ($450) from 590,000 won and raised its target for SK hynix to 4.7 million won from 3.8 million won, following the companies' latest earnings releases. The brokerage maintained an "overweight" investment rating on both stocks.

The revised targets represent increases of 10 percent and 24 percent, respectively, and are the highest price targets currently set by any domestic brokerage for the two companies.

The move stands in contrast to Samsung Securities and Shinhan Investment, both of which cut their targets for SK hynix and Samsung Electronics. Eight brokerages in total lowered their targets for SK hynix, which posted an earnings miss — results that fell short of market expectations.

Korea Investment & Securities said the market is excessively pricing in the risk of weakening memory chip demand and potential oversupply.

On Samsung Electronics, the brokerage said multi-year contracts "will not only improve the stability and visibility of the memory chip business, but also reduce the likelihood of a repeat of the oversupply cycles seen in the past, as investment will be driven by actual customer demand."

On SK hynix, it said that "despite rising capital expenditure, the shift toward HBM and leading-edge processes is structurally limiting the pace of supply growth," adding that "the market is reflecting skepticism, but solid fundamentals are being proven through earnings results."

The brokerage also said current share price levels are extremely undervalued.

Korea Investment & Securities said Samsung Electronics' share price trades at 1.3 times next year's book value per share, and added that "current valuations do not adequately reflect the value of solid earnings, cash generation capacity, and a clear shareholder return policy."

The brokerage said that for both Samsung Electronics and SK hynix, "it is necessary to focus on medium- to long-term corporate value rather than short-term market sentiment."