Employees enter and exit Samsung Electronics' office building in Seocho-gu, Seoul. [Yonhap]
Employees enter and exit Samsung Electronics' office building in Seocho-gu, Seoul. [Yonhap]

KB Securities raised its target price for Samsung Electronics on Thursday to 550,000 won from 530,000 won, citing growing signs of an earnings recovery driven by rising memory chip prices.

Kim Dong-won, head of the brokerage's research division, said in a report on Samsung Electronics that "a sharp earnings improvement driven by rising memory chip prices is becoming visible, and the company is expected to enter a full-scale valuation rerating phase."

Kim noted that second-quarter memory chip prices are forecast to surge more than 50 percent, led by server DRAM and enterprise solid-state drives, far exceeding market expectations. He projected second-quarter operating profit would reach 90 trillion won, a 19-fold increase from a year earlier.

He added that "competition among cloud service providers to secure memory capacity will intensify further in the second half of this year."

KB Securities forecast second-half operating profit at 228 trillion won, up 55 percent from the same period last year. Full-year operating profit is projected at 375 trillion won, a 761 percent jump from last year, with next year's operating profit seen rising a further 46 percent to 548 trillion won.

Kim also said that listing Samsung Electronics' American depositary receipts on a US exchange "is a viable capital-light option to broaden access for global investors," adding that related discussions are likely to grow.

In addition, large-scale shareholder return measures — including a buyback and a special dividend — were cited as positive factors.

Samsung Electronics buyback imminent?

Samsung Electronics' headquarters in Suwon, Gyeonggi Province. [Yonhap]
Samsung Electronics' headquarters in Suwon, Gyeonggi Province. [Yonhap]

Samsung Electronics is expected to launch a buyback of nearly 90 trillion won in the near future, industry sources said.

The move stems from a labor-management agreement to pay special performance bonuses in company shares, which requires Samsung Electronics to purchase additional shares beyond its current treasury stock holdings.

The company has been preparing to buy additional treasury shares to fund the special performance bonus payments and is expected to announce a detailed plan soon, sources said Wednesday.

Under the agreement, Samsung Electronics will allocate 10.5 percent of operating profit as special performance bonuses for its semiconductor division. Over the next three years, the total bonus payout is expected to reach approximately 154 trillion won.

Samsung Electronics plans to withhold about 40 percent of that amount in taxes and pay out approximately 93 trillion won in shares.

If Goldman Sachs' projected combined operating profit of 1,514 trillion won over the next three years is applied, the scale of the buyback could be even larger.

Meanwhile, Nomura Securities recently raised its target price for Samsung Electronics to 670,000 won from 590,000 won.


yul@heraldcorp.com