Samsung Electronics (005930) is expected to post operating profit of 555 trillion won next year, up more than 50% from this year, according to a brokerage forecast. Roughly 80% of the memory chips the company plans to produce next year have already been locked in through long-term supply contracts, and with prices rising for both high-bandwidth memory (HBM) and conventional memory, the visibility of earnings growth has improved, the brokerage said.
KB Securities estimated on the 20th that Samsung Electronics will report operating profit of 367 trillion won this year, a 742% increase from a year earlier, and 555 trillion won next year, up 51% from this year. Although the stock has tumbled recently on concerns over whether artificial intelligence investment will be sustained, next year's profit growth is all but assured given the memory supply contracts and rising prices, the brokerage said.
According to KB Securities, Samsung Electronics is estimated to have signed five-year long-term agreements (LTAs) with global big tech companies covering about 70% of its conventional memory output scheduled for production in 2027, including DRAM and NAND flash. Supply contracts are also believed to have been completed for the entire volume of HBM slated for production next year, centered on HBM4. Combined, that means about 80% of total planned memory output has already found buyers. Global large-scale cloud companies are also competing to secure the remaining 20% that has yet to be contracted, the brokerage said.
Higher selling prices from expanded HBM4 supply are also expected to support earnings. KB Securities projected that Samsung Electronics' average selling price (ASP) for HBM will rise 100% to 150% next year from this year. As the share of HBM4 — priced at the highest level in the industry — expands, it will drive up overall DRAM prices starting in the first quarter of next year, the brokerage said. DRAM prices in the first quarter are accordingly expected to post a double-digit percentage increase from the previous quarter.
KB Securities expects HBM4 to account for 80% of Samsung Electronics' HBM revenue next year, double this year's 40%. Samsung's HBM4 is expected to deliver industry-leading performance in data processing speed and bandwidth while also improving power efficiency by about 40% compared with the existing HBM3E.
"Stock volatility could widen in the short term depending on macroeconomic variables, but there is limited chance that the direction of next year's profit growth will be undermined, given the volumes secured through long-term supply contracts and rising memory prices," said Kim Dong-won, head of the research center at KB Securities.
