Kiwoom Securities (039490.KS) lowered its price targets for both Samsung Electronics (005930.KS) and Hyundai Motor (005380.KS). The brokerage cited somewhat reduced expectations for the memory chip market, along with uncertainty over Hyundai Motor's chances of improving earnings this year. It maintained a "buy" rating on both stocks, however, saying their medium- to long-term competitiveness remains intact.
Kiwoom Securities cut its price target for Samsung Electronics to 390,000 won from 430,000 won on Tuesday. "Samsung Electronics shares have risen based on earnings per share (EPS) growth, but in the second half, EPS growth will slow significantly, and volatility will expand depending on factors changing in the memory industry," said Park Yoo-ak, a researcher at Kiwoom Securities.
Park identified as a key variable the conservative stance finished-goods makers are taking on additional memory purchases. He explained that concerns over slowing demand are growing as rising prices for components such as memory, central processing units (CPUs), and substrates lead to full-scale increases in PC and smartphone selling prices. As a result, he projected that the likelihood of second-half memory price increases exceeding market expectations is low, and that third-quarter EPS would also be difficult to significantly surpass current market estimates.
However, he assessed expanding market share in high-bandwidth memory (HBM) 4 and enterprise solid-state drives (eSSD) as medium- to long-term growth drivers. Regarding the preliminary second-quarter earnings announced the previous day, he analyzed that the memory business led strong results on the back of rising DRAM and NAND prices.
Kiwoom Securities also lowered its price target for Hyundai Motor to 700,000 won from 750,000 won. "Given the cumulative profit-and-loss shock in the first half, it is difficult at this point to be confident about the possibility of profit growth this year," said Shin Yun-chul, a researcher at Kiwoom Securities.
Kiwoom Securities estimated Hyundai Motor's second-quarter revenue at 47.2 trillion won and operating profit at 2.83 trillion won. Those figures represent declines of 2.2% and 21.4%, respectively, from the same period last year.
The firm explained that production disruptions caused by successive fires at domestic plants and suppliers led to weak sales, while rising won-dollar and won-euro exchange rates increased the burden of foreign-currency sales guarantee provisions. It estimated related costs accumulated in the first half at about 400 billion won.
The exodus of foreign investors was also cited as a burden on the share price. Hyundai Motor's foreign ownership ratio, which exceeded 35% in January this year, has now fallen below 25%. "The logic of valuation expansion, driven early in the year by expectations for physical artificial intelligence (AI), was not sufficiently accepted by foreign investors," Shin said. "The key variable to reverse foreign inflows is ultimately a recovery in the core business that will raise EPS expectations through a recovery in the core business."
