Nomura keeps Samsung Electronics at Buy, raises target price to KRW670,000

Overview

This report is Nomura's company research and earnings review on Samsung Electronics. The report maintains a Buy rating and raises the 12-month target price to KRW670,000. The core logic is stronger pricing in the memory business, long-term agreements, and better earnings visibility, together with lower bonus accruals that lift near-term profit forecasts; however, non-memory businesses, smartphone hardware, and Foundry/LSI still face profit pressure.

Core views

Nomura believes Samsung Electronics' 2Q26F results will be better than previously expected, with operating profit forecast at KRW76tn, above the prior estimate of KRW67tn. The memory business, supported by higher prices, rising HBM prices, and long-term agreements, is the main source of valuation uplift. Meanwhile, Foundry/LSI revenue growth may accelerate thanks to better utilization and new customer wins, but higher bonus costs could widen losses; MX smartphone hardware may already have turned into an operating loss as memory costs rise.

Analysis framework

The report evaluates Samsung Electronics' relative performance versus the KOSPI 200 over the next 12 months using earnings estimate upgrades, a P/B valuation framework, assumptions for memory pricing and margins, profitability trends by business segment, and cash flow/shareholder return analysis as the main threads.

Methodology notes

• Valuation methodsTarget P/B valuation method

  Derive the target price by multiplying 12-month forward BVPS by the target P/B

  Nomura applies a 5.0x target P/B to 12MF BVPS of KRW133,139 to derive a 12-month target price of KRW670,000. The target multiple reflects improved business stability and visibility from long-term memory agreements and implies an approximately 8.3x target P/E.

• Earnings forecastOperating profit forecast by business segment

  Break down profit drivers by memory, non-memory, MX, and display businesses

  The report raises group 2026F/2027F operating profit forecasts by adjusting bonus accruals, memory prices, HBM profitability, Foundry/LSI utilization, and smartphone cost pressures.

• Shareholder returnDividend and buyback analysis

  Assess shareholder returns using payout ratio, dividend yield, and potential buybacks

  The report assumes a maintained 25% payout ratio in 2026F, which could lift total dividends to KRW95tn, or about 9x YoY growth, and expects share buybacks for employee incentives and shareholder returns to begin from 2H onward, with some repurchased shares possibly being canceled.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Electronics (005930.KS)

  Core coverage name

  Strengths

  Long-term memory agreements improve stability and visibility; rising DRAM, NAND, and HBM prices support earnings; 2026F/2027F operating profit is materially upgraded; potential buybacks and dividend growth improve shareholder returns.

  Weaknesses

  Current HBM profitability is lower than commodity memory; Foundry/LSI may see losses widen due to higher bonus expenses; MX smartphone hardware may turn unprofitable as memory costs rise.

  Comparison

  The report expects Samsung Electronics' memory price increases in 2Q to be larger than peers; the relative benchmark is the KOSPI 200.

  Risks

  U.S. tariffs on semiconductor products, delays in data center construction due to power shortages, and slower AI capex in a high-interest-rate environment.

• Memory business

  Main source of earnings upgrade

  Strengths

  Higher prices, long-term agreements, and rising HBM prices provide stronger earnings visibility.

  Weaknesses

  HBM margins remain clearly below commodity memory; if HBM is to approach the roughly 80% OPM of commodity memory, the current roughly 50% OPM HBM would require more than 100% ASP increases.

  Comparison

  Commodity memory has significantly higher profitability than HBM.

  Risks

  Pricing gains falling short of expectations or a demand slowdown would weaken earnings leverage.

• Non-memory businesses

  Profit drag

  Strengths

  Foundry/LSI revenue growth could benefit from better utilization and new customer wins.

  Weaknesses

  Higher bonus expenses linked to overall semiconductor division profitability may widen losses.

  Comparison

  Compared with the memory business, non-memory business profitability is weaker.

  Risks

  Insufficient utilization improvement, weaker-than-expected customer acquisition, or higher-than-expected cost pressure.

Key data

• RatingBuyBuy rating maintained.
• Target priceKRW670,000Raised from KRW590,000.
• Closing priceKRW353,500As of 2026-06-22.
• Implied upside+89.5%Implied gain versus the closing price.
• 2Q26F operating profit forecastKRW76tnAbove the prior forecast of KRW67tn.
• 2026F operating profit forecastKRW371tnRaised by 21% versus the prior estimate.
• 2027F operating profit forecastKRW598tnRaised by 38% versus the prior estimate.
• 2026F dividendKRW95tnUnder a 25% payout ratio assumption, total dividends could rise about 9x YoY.
• Common stock dividend yield4.4%Estimated based on the current share price.
• Preferred stock dividend yield6.9%Estimated based on the current share price.

Impact & implications

The report is moderately positive for Samsung Electronics as an investment: the memory upcycle, rising HBM prices, upward earnings revisions, and potential shareholder returns jointly support the higher target price. However, the investment view is not purely bullish, as weaker non-memory profitability, pressure on smartphone hardware margins, semiconductor tariffs, and slower AI capex amid high interest rates could still limit target-price realization.

Risks

• The United States may impose tariffs on semiconductor products.
• Power shortages may delay data center construction.
• AI capex may slow in a high-interest-rate environment.
• If HBM price increases fall short of expectations, it may be difficult to close the profitability gap versus commodity memory.
• Downward profit pressure in Foundry/LSI and MX smartphones may offset part of the improvement in the memory business.

What to watch

• Whether actual 2Q26F operating profit reaches or exceeds KRW76tn.
• The magnitude of HBM price increases from H2 2026F to 2027F and the resulting improvement in OPM.
• QoQ and YoY changes in DRAM and NAND ASPs.
• Foundry/LSI utilization, new customer progress, and changes in losses.
• Whether the smartphone business raises prices further to offset rising memory costs.
• Implementation of share buybacks, cancellations, and dividend policy after 2H.