Goldman Sachs Details Korea Memory "8 Key Focus Points": Valuation, Long-Term Agreements, Inventory, CXMT Impact, Buybacks, etc.
Goldman Sachs maintains a "Buy" rating on Samsung Electronics and SK Hynix, stating their recent sharp share price corrections reflect excessive market pessimism unsupported by fundamentals. The report addresses eight key market concerns:
1. **HBM Pricing:** GS forecasts HBM blended average prices for Samsung and SK Hynix to nearly double by 2027 due to persistent tight supply and a need to re-establish price premiums over standard DRAM.
2. **Long-Term Agreements (LTAs):** LTA terms are shifting in favor of suppliers, featuring longer terms, higher coverage targets (60-70% of capacity), "floor-price" protections, and significant upfront customer deposits.
3. **Inventory:** While module maker inventory is elevated, this represents a small portion of the overall market. Supplier and end-customer inventories remain healthy at low levels.
4. **NAND Supply:** Fears of a NAND oversupply are overblown. Strong enterprise SSD demand is expected to offset consumer weakness, with the supply-demand gap widening through 2027.
5. **Shareholder Returns:** GS expects both companies' actual dividends to exceed current market consensus. Share buybacks would be well-received, especially for SK Hynix to counter ADR-related dilution.
6. **SK Hynix ADR Premium:** The ADR's ~30% premium over the local share is likely persistent due to conversion constraints but aids long-term valuation re-rating by improving global investor access.
7. **SK Hynix Q2 '26 Results:** The earnings miss was due to one-time factors like slower HBM4 mix transition. Q3 is expected to see a strong recovery with higher volumes and better pricing/mix.
8. **CXMT Impact:** The competitive threat from China's CXMT is limited to the domestic market due to its technology lag and different product mix, posing minimal risk to the global supply-demand balance.
GS concludes the current low valuations (approx. 3.5x 2027 P/E) imply an unrealistic lack of profit sustainability.
marsbit7h ago
