Institution: South Korean Memory Stock Valuation Approaching Fair Level, Market's Earnings Expectation for Memory Industry May Be Overly Optimistic

BlockBeats News, July 22nd, an independent research firm TS Lombard's report shows that the valuation of South Korean memory chip stocks has reached a reasonable level, but the market's expectations for the future profitability of storage companies may still be overly optimistic. The traditional DRAM contract price quarterly increase has decreased from 93% to 98% in the first quarter to 58% to 63% in the second quarter. TrendForce expects a further slowdown to 13% to 18% in the third quarter; the spot market has stabilized, and DRAM and HBM prices have started to decline.

The report points out that long-term supply agreements can provide bottom support for sales volume and prices, but they will also limit suppliers from further price increases. The related protection will gradually weaken in the next year, making it difficult to support another significant upward revision of profit expectations.

Regarding HBM, the annual contract price increase in 2026 lags behind traditional DRAM. In the first quarter, HBM's profitability was even lower than 64GB DDR5 RDIMM. Although the larger chip size and wafer resources in 2027 theoretically favor supplier negotiations, supply participants are increasing, ChangXin has started sampling, and global traceable DRAM production capacity is expected to reach approximately 2.1 million wafers per month by the end of 2026. TSMC has also entered the HBM4 base chip and packaging processes.

The current market consensus expects storage companies' EPS to grow by 36% to 40% in 2027, while TrendForce estimates that unit supply will only increase by 15% to 20%. TS Lombard believes that Samsung Electronics and SK Hynix's current stock prices roughly reflect a 40% to 50% lower profitability scenario in 2027 compared to the market consensus expectations, indicating that the valuation is approaching a reasonable level, but the storage cycle risk has not yet completely disappeared.