"Now is not the time to sell Samsung and SK Hynix!" Korea Meritz Securities: The market is misjudging.

As the stock prices of Samsung Electronics and SK Hynix come under pressure, analysts from Korean brokerage firms are sending contrary signals, believing the market has made significant misjudgments regarding industry fundamentals and that now is actually a good opportunity to invest.

On July 17, according to Korean media reports, Kim Sunwoo, an analyst at Meritz Securities, directly stated in his latest report, “The butterfly effect caused by misunderstandings is disturbing semiconductor stock prices”, emphasizing that investors are mistaking fragmented information for the whole picture, leading to myopic and pessimistic interpretations. He believes that the current excessive market worries will dissipate with the upcoming realization of shareholder returns and advancements in cooperation with tech giants.

From a valuation perspective, Kim Sunwoo pointed out that both Samsung Electronics and SK Hynix are currently extremely undervalued. According to his report, SK Hynix’s expected P/E for 2027 is only about 3.5 times, and Samsung Electronics about 3.9 times, both at historically very low levels. He stated, "The degree of panic is proportional to the expected return, and this lesson deserves special attention at this moment."

Supply Gap: Market Underestimates the Severity of the Shortage

Kim Sunwoo questions the market’s widespread judgment of “oversupply in 2027.” According to his calculations, the DRAM market in the second half of 2026 will have a demand fulfillment rate of only 75% to 80%, and the supply gap is intensifying.

He further predicts that in 2027, this fulfillment rate will drop to about 60%, and even when only considering real terminal demand (excluding inventory stocking and other factors), the rate is only about 70%. “A further deepening supply shortage is a fairly certain scenario,” the report states.

This judgment is corroborated by other market voices. Intel’s CEO previously stated that memory supply and pricing won’t ease at least until 2028. Among the 16 long-term supply agreements (LTAs) Micron recently signed, included were “take-or-pay” quantity guarantees favoring buyers, which also demonstrates structural support for memory demand.

LTA Controversy: SK Hynix’s “Investment” Rather Than “Sacrifice”

Recently, there have been rumors that SK Hynix signed LTAs with major tech firms by offering substantial price reductions. Kim Sunwoo explicitly refuted this.

He believes this move is not a simple price compromise but a preemptive strategic positioning to seize the “large new customer base” in generative AI and AI data center (AIDC) markets. SK Hynix is binding core demand customers to build mid- and long-term stable demand sources.

Kim Sunwoo wrote in his report:

SK Hynix is focusing on the construction of mid- and long-term demand… Especially through alliances or joint ventures (JV) related to AIDC, new demand parties are forming, and there is a possibility of monopoly in this field’s stable market share.

His conclusion is that SK Hynix is making an investment rather than a sacrifice.

Shareholder Return Catalysts: Samsung Buybacks and SK Hynix Special Dividends Soon

Kim Sunwoo believes current excessive market pessimism will be dispelled by a series of upcoming positive events.

For Samsung Electronics, its three-year shareholder return plan is entering its final phase this year, with significantly increased visibility of returns. The report predicts that stock buybacks for cancellation, cash dividends, and buybacks for employee incentives will collectively serve as catalysts for a stock price rebound. As for SK Hynix, Kim Sunwoo expects the company will proactively research special dividends and other additional return measures.

Meanwhile, progress on the AIDC business front is also worth watching. Kim Sunwoo said that SK Hynix and SK Group have announced they will formally push forward AIDC business from the second half of this year, with cooperation with US tech giants and frontier model enterprises expected to soon be announced, involving joint ventures, equity investments, and usage commitments and other arrangements.

On valuation, the report cites market forecasts showing that based on 2027 earnings, SK Hynix’s corresponding P/E is about 3.5 times and Samsung Electronics about 3.9 times, both extremely undervalued. Kim Sunwoo wrote in his report:

The company is in an excessively adjusted phase. The degree of panic is proportional to the expected return, and this lesson should be fully emphasized at this moment.

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