KB Securities said in an analysis released on the 26th that the operating profit Samsung Electronics and SK hynix will post over the two years 2026-27 will reach 1,571 trillion won, more than double the profit accumulated over the past 26 years. The assessment is that, although 70-80% of next year's memory volume is locked in by long-term contracts on rising demand for AI (artificial intelligence) chips, the two companies' PER (price-to-earnings ratio) has fallen to around 3 times, leaving them historically undervalued.
In a report published the same day, Kim Dong-won, head of research at KB Securities, said, "Stock prices are the slope of future earnings," adding that attention should be paid to the coming profit growth and the room for valuations to normalize.
According to the report's estimates, the two companies' combined operating profit for 2026-27 is 1,571 trillion won. That is 2.1 times the 748 trillion won in operating profit accumulated over the 26 years from 2000 to 2025. For next year alone, KB Securities projects Samsung Electronics at 555 trillion won and SK hynix at 389 trillion won, up 51% and 50% respectively from this year.
KB Securities cited long-term supply agreements (LTAs) as the basis for this profit growth. The report estimated that about 70-80% of the memory the two companies will produce next year is effectively secured through five-year long-term supply agreements with global big tech customers. Only 20-30% of volume has yet to be contracted, and competition among big tech firms to secure memory is continuing, it said. "Profit growth in 2027 is judged to be effectively settled," the report said.
KB Securities believes share prices are not fully reflecting these earnings forecasts. Foreign ownership has fallen to 46.1% for Samsung Electronics and 48.8% for SK hynix, the lowest since the 2008 global financial crisis. The gap is also large compared with the all-time highs of 59.7% for Samsung Electronics and 54.7% for SK hynix.
KB Securities analyzed that doubts about the profitability of AI investment have spread into concerns over funding burdens and investment cuts, freezing foreign buying and investor sentiment alike. However, it noted that Ken Griffin, CEO (chief executive officer) of the global hedge fund Citadel, has recently turned optimistic about the growth of the AI industry, and that Nvidia CEO Jensen Huang also sees a low chance of a memory oversupply in 2029, citing the growth of the AI industry.
Even so, KB Securities' assessment is that the two companies' PER has fallen to around 3 times, entering an undervalued zone comparable to the financial crisis. Saying the market is underestimating the two companies' medium- to long-term earnings power, KB Securities said, "It is now time to pay attention to future profit growth and the possibility of valuation normalization rather than the pessimism already priced into share prices."