Mirae Asset Securities attributed recent declines in global memory semiconductor stocks to forecasts of falling NAND prices, with the sector dropping approximately 30% from its May 20 peak. Analyst Kim Young-gun stated on the 26th that the primary cause of the correction was the anticipated NAND price decline, not Q2 earnings concerns or market liquidity disruptions as some market participants suggested. The analyst assessed that the stock price adjustment has sufficiently absorbed downside risks, recommending investors buy at current lows. Market research firm TrendForce projected on the 16th that NAND contract prices will begin falling from 3Q next year due to easing supply-demand conditions.
TrendForce Forecasts NAND Price Declines Starting 3Q Next Year
TrendForce projected that NAND contract prices will fall starting from 3Q next year, driven by supply-demand easing. On the demand side, the bit shipment growth rate for enterprise SSDs is expected to decline from 3Q, reflecting that current strong demand partially includes preemptive stockpiling. On the supply side, new wafer production capacity (CAPA) expansion is anticipated from 2Q next year. Samsung Electronics plans to operate its Xi'an fab after completing the V-NAND (V9) conversion, while Kioxia's K2 fab, SK Hynix's Dalian fab, and YMTC's new fab are also expected to come online. Mirae Asset Securities estimated NAND oversupply rates at 1.1% in 3Q next year and 12.2% in 4Q next year, compared to -10.8% in 1Q this year.
Kim stated that while additional supply-demand easing is possible, the level of new NAND industry CAPA next year is insufficient to cause excessive oversupply in a situation where uncertainty about supply excess is not significant. He noted that the approximately 30% stock price decline from the peak has substantially resolved concerns about NAND price impacts on stock valuations.
DRAM Prices Expected to Rise Through Year-End Next Year
In contrast to NAND, DRAM prices are projected to continue rising through year-end next year. TrendForce forecasted that 16GB DDR4 and DDR5 contract prices will increase by 43% and 38% respectively from this month through December next year.
Regarding Alphabet's Q2 results, Kim emphasized the importance of focusing on backlog rather than capital expenditure (CAPEX). Alphabet's Q2 backlog reached $514 billion, up from $468 billion in Q1 (a 92.6% quarter-over-quarter increase). Kim stated that because big tech CAPEX serves as a means to convert backlog into revenue, sustained capital investment is inevitable as long as backlog remains solid. He noted that Alphabet presented the possibility of meaningful CAPEX increases next year, and forecasted that Microsoft and Amazon will also show upward trends.
Mirae Asset Maintains Samsung Electronics and SK Hynix Target Prices
Based on this analysis, Mirae Asset Securities maintained target prices of 550,000 won for Samsung Electronics and 4,200,000 won for SK Hynix, presenting the current level as an effective range for increasing positions at lows. Kim stated that Samsung Electronics and SK Hynix have fallen approximately 26% and 37% respectively from their recent one-month peaks, causing their 12-month forward price-to-book (P/B) and price-to-earnings (P/E) multiples to enter very low levels relative to return on equity (ROE) at 1.8x and 4.4x, and 2.7x and 5.1x respectively. He added that Samsung Electronics in particular offers dividend yields (including interim dividends) of 7.9% for common shares and 11.1% for preferred shares at current price levels.
FAQ
What caused the recent decline in semiconductor stocks according to Mirae Asset Securities?
Mirae Asset Securities analyst Kim Young-gun attributed the approximately 30% decline from the May 20 peak primarily to forecasts of falling NAND prices starting from 3Q next year, rather than Q2 earnings concerns or market liquidity issues as some market participants suggested.
What are the target prices for Samsung Electronics and SK Hynix?
Mirae Asset Securities maintained target prices of 550,000 won for Samsung Electronics and 4,200,000 won for SK Hynix, recommending the current levels as an effective range for increasing positions at lows after the stocks fell 26% and 37% respectively from recent peaks.
