Strong Memory Segment Growth; Target Price Set at KRW 350,000
AI summary card
Strong Memory Segment Growth; Target Price Set at KRW 350,000
Samsung Electronics’ Q1 2026 earnings significantly exceeded expectations, driven by a sharp improvement in memory segment profitability and continued upward revisions to HBM sales targets. The firm maintains its Overweight rating.
- DRAM operating profit margin (OPM) reached 79% in Q1, expected to rise to 84% in Q2
- 2026 HBM sales growth target raised to more than 3x
- NAND OPM improved from 24% to 57%
- Target price of KRW 350,000 implies 57% upside potential
- Inventory levels reduced to minimal levels; capacity utilization at full load
Report interpretation
Overview
J.P. Morgan’s summary of Samsung Electronics’ Q1 2026 results shows that the company significantly outperformed expectations, primarily due to a strong recovery in its memory business. The report maintains an Overweight rating with a target price of KRW 350,000, reflecting positive views on Samsung’s performance during the memory upcycle, particularly the rapid growth of its HBM business.
Core views
Memory segment delivered exceptional performance: DRAM operating profit margin reached 79% in Q1 2026, up sharply from 55% in Q4 2025, and is expected to further expand to 84% in Q2. Average DRAM selling prices rose by 92% in Q1, with another 44% increase anticipated in Q2. NAND also showed strong momentum, with operating profit margin improving from 24% in Q4 to 57% in Q1, supported by an 88% increase in average selling prices. HBM business grew rapidly: The company has continuously raised its HBM sales growth target—from a 2x target set in October 2025 to over 3x as of April 2026. Q2 HBM unit sales are expected to grow 35% quarter-over-quarter, increasing its revenue share from 7% in Q1. Inventory and capacity conditions improved: Both DRAM and NAND inventories have been reduced to extremely low levels, and NAND capacity utilization is now at full load. Capital expenditure outlook remains positive, with total memory capex projected to increase by 49% in 2026 and 31% in 2027. Other business segments: Foundry operations are showing gradual improvement, with restructuring underway for mature nodes. Display segment faced pricing pressure, posting a 6% operating margin in Q1, though sequential improvement is expected. Device eXperience (DX) segment saw its margin decline to the mid-single digits, pressured by rising memory component costs.
Analysis framework
The report employs a segment-by-segment analysis approach, with a particular focus on volume-price dynamics and profitability trends in the memory business. By comparing quarterly changes and analyzing inventory levels and capacity utilization rates, the report assesses the tightness of supply-demand conditions. For valuation, the report applies a premium valuation methodology relative to historical peak-cycle multiples, based on expectations of a sustained multi-year memory upcycle and improving foundry order trends. It also closely monitors HBM execution progress and market growth expectations.
Methodology notes
Premium valuation relative to historical peak PB multiples
The report uses a 2.2x FY26E–27E price-to-book (PB) multiple, applying a 10% premium over historical FTM PB peaks to reflect expectations of a multi-year memory upcycle and improving foundry orders.
Memory supply-demand environment analysis
The report evaluates memory market tightness by tracking inventory levels, capacity utilization, and price movements. Extremely low inventory and full-capacity utilization indicate tight supply conditions.
ROE improvement supports valuation premium
The report expects significant ROE improvement to justify a valuation premium—a typical financial characteristic during memory upcycles.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Samsung Electronics (005930.KS)Direct beneficiary of memory price recovery and HBM demand growth
- Strengths
- Market leadership in memory, HBM technology advantage, diversified business structure
- Weaknesses
- Device eXperience segment pressured by component cost increases; display segment facing pricing headwinds
- Comparison
- Among memory peers, Samsung’s HBM growth outlook exceeds market averages
- Risks
- Prolonged memory price downcycle, weaker-than-expected HBM demand from ASIC customers
Key data
- Q1 2026 DRAM Operating Profit Margin79%Up significantly from 55% in Q4 2025; expected to reach 84% in Q2
- Q1 2026 DRAM Average Selling Price Increase92%Excluding HBM, non-HBM products rose by 105%
- Q1 2026 NAND Operating Profit Margin57%Markedly improved from 24% in Q4 2025
- 2026 HBM Sales Growth TargetMore than 3xContinuously raised from the 2x target set in October 2025
- FY26–27E EPS Upward RevisionApproximately 34%Primarily driven by the semiconductor business
Impact & implications
The report believes Samsung Electronics is positioned strongly within a robust memory upcycle, with rapid HBM growth providing additional momentum. As inventories normalize and supply-demand conditions tighten, profitability is expected to continue improving. The valuation gap versus memory peers is anticipated to narrow.
Risks
- Prolonged memory price downcycle
- Weaker-than-expected HBM demand from ASIC customers
- Delays in HBM qualification for future product generations
- Slower-than-expected mobile device growth
What to watch
- Memory price trends
- HBM business execution progress
- Foundry order recovery
- Inventory level changes