LS Securities (078020) cut its target price for SK hynix (000660) by about 27% while raising its target for Samsung Electronics (005930) by 12.5%. The brokerage said Samsung is rapidly improving its mass-production competitiveness in HBM4, the sixth-generation high-bandwidth memory, raising the likelihood that the HBM supply structure concentrated on SK hynix will shift.
Samsung's HBM4 Presence Grows; Target Raised to 450,000 Won From 400,000 Won
LS Securities raised its target price for Samsung Electronics to 450,000 won from 400,000 won on the 31st. The revision came as the brokerage estimated, based on industry data, that HBM4's share of Samsung's HBM shipments rose to about 35% in the second quarter from about 5% in the first quarter of this year.
Production stability has improved considerably with HBM4 compared with when Samsung first mass-produced the previous generation HBM3E, LS Securities said. With the HBM4 shipment share expanding quickly, further gains in combined yield could bring forward the point at which rising HBM sales lift Samsung's overall profitability, earlier than previously expected.
The brokerage accordingly raised both its HBM shipment and profitability forecasts for Samsung Electronics. It set the target price 50,000 won higher at 450,000 won.
On the broader memory market including HBM, however, LS Securities ruled out a scenario of continued steep price increases. A memory supply shortage is likely to persist over the medium to long term, but prices have already risen sharply, increasing the burden memory places on Big Tech server capital spending. Room for further price increases may be more limited than in the past, the brokerage said.
Once Samsung Electronics restores its HBM4 competitiveness, the standard for assessing the stock will also change, LS Securities said. Rather than a continued expansion of the multiple applied to the stock simply because earnings are growing, the brokerage presented as its base case a range of 1.0 to 1.3 times price-to-book ratio (PBR) based on projected 2028 controlling-interest equity.
SK hynix Target Down 27%; 'Not a Sign HBM Growth Is Over'
Expectations for SK hynix, by contrast, fell sharply. LS Securities maintained a "buy" rating but lowered its target price to 2.4 million won from 3.3 million won, a cut of 900,000 won, or about 27.3%.
The biggest change is the outlook for HBM profitability next year. LS Securities had expected SK hynix's HBM operating profit margin (OPM) to rise to about 80% next year, but after reviewing recent industry conditions it revised the forecast to about 60%, similar to this year's level. It also lowered its HBM profit estimate for next year accordingly.
The revision also reflects a judgment that excessively high profitability could instead strain the AI investment ecosystem. If the HBM operating margin rises to 80%, Nvidia, a major customer, could be forced to raise product prices further to maintain a gross profit margin (GPM) of about 75%, the brokerage said. That could also affect Big Tech server budgets, already under pressure from rising memory prices, as well as the expansion of the commodity DRAM market.
Taking these factors into account, LS Securities assessed an HBM operating margin of about 60% as a "Goldilocks" level that satisfies customers, memory makers and the continuity of AI investment. Still, if production yields improve further and costs fall, there remains room for SK hynix's HBM margin to rise again, the brokerage said.
LS Securities also said the target price cut should not be read as a signal that growth in the HBM market is over. Its positive view on SK hynix's HBM shipment expansion and medium- to long-term demand is unchanged, and the core of the target price adjustment is a lower assessment of the likelihood that the previously expected "excess profitability" will materialize next year.
The key issue going forward lies in the competitive landscape rather than HBM demand itself, according to the brokerage. As Samsung Electronics increases HBM4 shipments and improves mass-production capability, major customers gain more room to divide supply among multiple vendors. The premium formed as supply was concentrated on a single vendor may also decline.
Jung Woo-sung, an analyst at LS Securities, described this not as a slowdown in the HBM market but as "a process in which the competitive structure among suppliers is normalizing." SK hynix's share price going forward will depend less on how much the HBM market grows than on how well the company defends its technological lead in next-generation HBM and how long it maintains a high share within major customers, the analyst said.
