UBS Maintains a Buy Rating on Samsung Electronics as 2Q26 Preliminary Operating Profit Generally Meets Expectations

Overview

This report is UBS's commentary on Samsung Electronics' 2Q26 preliminary results. The company reported 2Q26 preliminary revenue of Won171.0tn and operating profit of Won89.4tn. Revenue was slightly below UBS's forecast but broadly in line with market expectations; operating profit was broadly in line with UBS and the consensus. UBS believes the results already reflect the employee profit-sharing reserve, and the focus ahead is on storage semiconductor price momentum, HBM qualification progress, and terminal demand visibility from the 2Q26 conference call on July 30.

Core views

UBS's core view is constructive: on one hand, strong ASP gains in DRAM and NAND are driving semiconductor operating profit growth, with further upside still possible in 3Q26; on the other hand, non-semiconductor businesses are mixed, with smartphone shipments potentially better than expected but storage cost increases likely to pressure mobile margins and expand MX & Networks operating losses in 2H26. UBS maintains a Buy rating, stating Samsung Electronics common shares are fairly valued at 3.22x forward 12-month P/BV, implying long-term ROE of 30.3% and cost of equity of 9.4%.

Analysis framework

The report combines a preliminary result read, segment-level operating judgment, and a valuation framework. It first compares differences between 2Q26 preliminary revenue and operating profit and UBS forecasts and consensus expectations, then splits operating changes across storage, Foundry/LSI, Mobile, Display, Consumer Electronics, and Harman, and finally derives common-stock valuation using a target NTM P/BV multiple based on long-term ROE and cost of equity, then translates the GDR target price using a 25:1 conversion ratio and the latest exchange rate.

Methodology notes

• Valuation methodsTarget NTM P/BV

  Determines a target forward 12-month P/BV for common shares based on long-term ROE and cost of equity.

  UBS applies a 3.22x NTM P/BV valuation for Samsung Electronics common shares, with key assumptions including long-term ROE of 30.3% and cost of equity of 9.4%.

• Earnings ForecastForecast Stock Return

  Expected 12-month price appreciation plus dividend yield.

  The report discloses 73.0% forecast price upside, 5.4% forecast dividend yield, and 78.3% forecast total stock return, above the 9.0% assumed market return.

• Short-term factor assessmentQuantitative Research Review

  UBS's quantitative Q&A assessment of the probability of short-term factor occurrences by analysts.

  This cycle's Q&A shows an industry structure score of 5, a stock fundamental trend score of 5 for the past 3-6 months, and a score of 4 for whether the next EPS update is likely relative to consensus, with short-term catalysts seen as positive.

Asset mapping & comparison

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

• Samsung Electronics ordinary shares (005930.KS)

  Core coverage name; UBS maintains a Buy rating with a Won550,000 target price.

  Strengths

  A leading global electronics group, among the world leaders in storage semiconductors, LCD/OLED panels, and TV revenue. As DRAM participants have shrunk, long-cycle memory cyclical risk has somewhat decreased; rising storage ASPs are now materially lifting profits.

  Weaknesses

  The mobile business is dragged by rising storage costs, and MX & Networks operating losses may expand further in 2H26; Consumer Electronics and smartphone businesses still face slower growth in mature markets and intense competition.

  Comparison

  The company has roughly 45% share in storage semiconductor revenue and ranks second globally in smartphone and tablet sales. Mid-tier smartphone competitors under storage cost pressure may lift Samsung A-series unit growth.

  Risks

  Storage and display panels are cyclical and have commodity-like characteristics, and fluctuations in supply-demand and capex can lead to cyclical revisions. A stronger won can hurt earnings. As a major KOSPI constituent, the stock carries Korea market risk, and governance and shareholder return practices have some opacity.

• Samsung Electronics GDR

  A mapped asset of the common shares.

  Strengths

  UBS sets a GDR target price of US$8,960, based on the common-stock target price, a 25:1 conversion ratio, and the latest FX rate.

  Weaknesses

  Affected jointly by common-share fundamentals, FX and the conversion ratio.

  Comparison

  The GDR valuation is derived by converting Samsung ordinary-share (005930.KS) target price rather than from an independent business valuation.

  Risks

  Exchange-rate volatility and changes in common-share valuation can impact GDR price performance.

Key data

• 2Q26 preliminary revenueWon171.0tnUp 28% quarter-on-quarter and 129% year-on-year; slightly below UBS's forecast of Won187.7tn, close to the Visible Alpha consensus estimate of Won169.4tn.
• 2Q26 preliminary operating profitWon89.4tnUp 56% quarter-on-quarter and 1812% year-on-year; broadly in line with UBS's forecast of Won91.0tn and the consensus estimate of Won87.3tn.
• 2Q26 DRAM bit shipment growthclose to 5%UBS's estimate is broadly in line with its prior high single-digit guidance.
• 2Q26 NAND bit shipment growth2%UBS's estimate is broadly in line with its prior low single-digit guidance.
• 2Q26 DRAM blended ASPalmost 56% quarter-on-quarter growthIncludes LTAs and HBM.
• 2Q26 NAND ASP70% quarter-on-quarter growthStrong pricing trends are a major driver of semiconductor operating profit growth.
• 3Q26 DRAM ASP forecast22% quarter-on-quarter growthUBS sees further upside.
• 3Q26 NAND ASP forecast30% quarter-on-quarter growthUBS expects storage price momentum to continue supporting further growth in semiconductor operating profit.
• Smartphone Sell Inslightly above the 60m-unit forecastA-series sales may benefit as mid-tier competitors are pressured by higher storage costs.
• Target priceWon550,00012-month target; common-stock valuation is based on 3.22x NTM P/BV.
• Current priceWon318,000As of 2026-07-06.
• Estimated total stock return78.3%Includes 73.0% forecast price upside and 5.4% forecast dividend yield.

Impact & implications

The report suggests that Samsung Electronics' investment case remains mainly supported by upward pressure in the storage cycle. If price and qualification improvements for DRAM, NAND, and HBM continue, semiconductor profitability may be upgraded further; however, mobile cost pressure could weaken non-semiconductor contribution. For investors, the July 30 call, terminal demand visibility, the degree of upside in traditional storage prices, and HBM qualification progress are key to validating the Buy rating and target-price assumptions.

Risks

• The storage and display panel industries are cyclical; shifts in supply-demand, capex, and pricing can cause profit revisions.
• Although DRAM's long-term competitive dynamics have improved, cyclical pullbacks still remain possible.
• The smartphone market is mature, with slower industry revenue growth and high competitive and marketing expense pressure.
• Rising storage costs may continue to compress MX & Networks margins and expand 2H26 operating losses.
• A stronger won versus major currencies could negatively affect Samsung Electronics earnings.
• As a large component of the KOSPI, the company is indirectly exposed to South Korea-specific market and country risks.
• Samsung's group governance carries risks from limited transparency in decision-making and insufficient attention to shareholder returns.
• Foundry/LSI losses may exceed UBS's prior forecasts due to factors such as reserves.

What to watch

• The 2Q26 conference call at 10AM KST on 2026-07-30.
• Whether terminal demand visibility improves.
• Whether traditional DRAM and NAND prices continue to rise above expectations.
• Progress of HBM qualification.
• Whether 3Q26 DRAM and NAND bit shipment growth reaches UBS's forecast.
• The extent to which MX & Networks losses expand in 2H26.
• The ongoing impact of the employee profit-sharing reserve on subsequent income statements.
• The effect of won FX movements on earnings and GDR valuation.