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LS Securities has raised its target price for Samsung Electronics while sharply cutting its target for SK hynix, citing a reassessment of the competitive landscape in the HBM market as Samsung rapidly closes the gap in sixth-generation HBM4 production.

On Monday, LS Securities raised its target price for Samsung Electronics by 12.5%, from 400,000 won to 450,000 won, while maintaining a buy rating. At the same time, it kept its buy rating on SK hynix but cut the target price by 900,000 won — about 27.3% — from 3.3 million won to 2.4 million won.

Samsung's HBM4 share rises to 35%; target lifted to 450,000 won

The main reason LS Securities raised its outlook on Samsung Electronics is a recovery in HBM4 competitiveness. Samsung had long been seen as trailing rivals in customer qualification and production stability for HBM, but the brokerage said manufacturing stability for HBM4 is improving faster than expected.

Drawing on industry data, LS Securities estimated that HBM4's share of Samsung's total HBM shipments climbed from about 5% in the first quarter of this year to roughly 35% in the second quarter. Compared with the early mass-production phase of the previous-generation HBM3E, the HBM4 ramp-up has involved fewer setbacks and higher overall manufacturability, the brokerage said.

Blended yields have continued to improve even as the share of HBM4 shipments has risen quickly — a development the brokerage viewed positively. If new-product mix expansion and yield stabilization proceed in tandem, the point at which HBM revenue growth translates into broader profitability gains for Samsung could arrive sooner than the market expects.

"If blended yields improve further as HBM4's share expands, the pace at which HBM revenue growth feeds through to Samsung Electronics' overall profitability could significantly exceed current market expectations," said Jeong Woo-seong, an analyst at LS Securities, who raised both shipment and profitability estimates for the company.

LS Securities cautioned, however, against expecting unlimited price increases across the memory chip sector. While a supply shortage in memory chips could persist over the medium to long term, prices have already risen sharply enough that memory now represents a meaningful cost burden within big tech companies' server investment budgets.

"Memory supply shortages will likely continue over the medium to long term, but given that memory's share of big tech server budgets has already risen on the back of price increases, the room for further price hikes will be more limited than in the past," Jeong said.

Against that backdrop, LS Securities set its base scenario for Samsung Electronics' share price at a price-to-book ratio of 1.0 to 1.3 times based on 2028 forecast equity attributable to controlling shareholders, rather than projecting unlimited multiple expansion following the HBM4 competitiveness recovery.

SK hynix target cut 27%; HBM profitability outlook revised down

For SK hynix, LS Securities recalibrated its HBM profitability outlook for next year. The brokerage had previously expected SK hynix's HBM operating profit margin to reach around 80% next year, but revised that estimate down to roughly 60% — in line with this year's level — to reflect current industry conditions.

The target price cut is driven not by a slowdown in HBM demand but by a recalibration of expectations for excess profitability. The growth outlook for the HBM market remains positive, but LS Securities said the exclusive premium SK hynix has enjoyed could erode as Samsung Electronics expands its HBM4 supply.

LS Securities said that if HBM operating profit margins were to climb toward 80%, the investment burden on key customers such as Nvidia and major big tech companies could increase significantly. Maintaining Nvidia's gross margin of around 75% would likely require further increases in AI chip prices, which in turn could strain big tech server budgets already under pressure from rising memory prices.

LS Securities therefore characterized an HBM operating profit margin of around 60% as a "Goldilocks" level — one that customers, memory chip manufacturers, and the broader AI investment ecosystem can all sustain. The brokerage argued that profitability settling within a sustainable range, rather than climbing excessively, is ultimately more conducive to market expansion.

That said, LS Securities noted that if production yields improve further and costs fall, SK hynix's HBM profit margins could rise again. The target price cut, it stressed, should not be read as a signal that HBM's growth trajectory has run its course.

Monopoly premium fades; technology edge and market share become key variables

Samsung Electronics' expanded HBM4 supply is likely to prompt major customers to diversify their supply chains. From the perspective of AI semiconductor customers such as Nvidia, securing HBM from multiple suppliers rather than relying on a single vendor offers greater stability. Under that scenario, the premium that had been concentrated at SK hynix could partially diminish.

LS Securities interpreted this not as a slowdown in the HBM market but as a normalization of competition among suppliers. Even as overall HBM demand continues to grow, the structure could shift from one in which a single company captures most of the benefit to one in which Samsung Electronics and SK hynix compete on more equal footing.

The variables that will drive SK hynix's share price are likely to be its technology lead in next-generation HBM and its ability to maintain share with key customers — more so than the overall size of the HBM market. The faster Samsung improves HBM4 manufacturability and yields, the greater the pressure on SK hynix in terms of pricing and profitability.

Conversely, if SK hynix sustains a technology gap in next-generation products and holds on to a high share with major customers, room for a re-rating remains even after the target price cut. As the HBM market continues to expand, the central question is shifting from whether growth will materialize to which companies will capture how much of that growth.

The target price adjustments by LS Securities are being read as a signal that the AI memory market has entered a phase of full-fledged multilateral competition. With HBM4 production stability, yields, customer qualification, and supply diversification all converging, the valuations of both Samsung Electronics and SK hynix are expected to move away from the old framework of "latecomer discount" and "monopoly premium" toward a fresh reassessment.


rainbow@heraldcorp.com