Samsung Electronics: 1Q26 – Stronger For Longer

Core Conclusion

Samsung Electronics posted a record 1Q26 revenue of W133 trillion, up 69% YoY and 43% QoQ, driven by semiconductor sales that grew 2.6x YoY (memory up 292%). The structural change in memory supply-demand dynamics—led by high-binding long-term agreements (LTAs) and HBM4 ramp—justifies a structural re-rating. At 4.3x NTM P/E and 2.3x P/B, the stock remains deeply undervalued relative to a 5x higher ROE vs. past cycle peaks.

What the Market Underestimates

The prevailing view treats memory as cyclical, but three structural shifts break the cycle pattern:

LTAs are becoming a material share of total capacity with binding commitments, tightening supply in 2027 beyond what consensus models imply.
HBM4 is already ramping since 1Q26, with HBM bit shipment guided to triple in 2026 under "sold out" conditions—this is not a spot-market proxy.
Agentic AI is driving renewed pricing power and HBM repricing in 2027, which will lift EPS materially above current estimates. Capital returns (dividends, buybacks) are not factored into forecasts.

Evidence Chain

Revenue & Semiconductor Acceleration

1Q26 revenue W133tr (vs. W78.7tr in 1Q25). Semiconductor sales grew 2.6x YoY, memory +292%.
HBM4 ramp began in 1Q; bit shipment target triple in 2026 on sold-out conditions.

LTA Tightening Capacity

High level of binding LTA commitments will make LTAs a significant portion of total capacity, reducing spot-market volatility and locking in higher margins for multi-year contracts.

Foundry & Technology Leadership

HBM4/4e first-to-market and advanced-node wins in foundry challenge the narrative of technology parity with SK hynix.

Valuation Disconnect

NTM P/E of 4.3x, P/B of 2.3x. ROE is 5x higher than past cycle peaks, yet valuation multiples remain at trough levels. EPS set to rise materially on HBM repricing.

Capex Discipline

2026 capex in W60-70tr range (total capex W110tr minus R&D), mainly DRAM and foundry. This implies capital allocation discipline, not oversupply.

Key Risks

Labor and supply disruptions – viewed as transitory; not expected to impact output materially.
Downside risks from product cycle – competition from Apple and Chinese smartphone OEMs, earnings concentration in semiconductors.
Cycle reversal – if AI demand slows or hyperscale capex decelerates, memory pricing could revert. However, LTA structure mitigates downside sensitivity vs. prior cycles.

Valuation & Trade Implication

Rating: Overweight (Top Pick). Price target W362,000, based on residual income valuation with 11.5% cost of equity, 3% terminal growth. At a P/B of ~2x on 2027e, in line with commodity-cycle peaks, but fundamentals are structurally stronger.
Catalysts: 1) Further LTA deal announcements; 2) HBM4 volume ramp in 2H26; 3) upward EPS revisions from HBM repricing in 2027; 4) capital return announcements.
Entry point: 4.3x NTM P/E is historically cheap for a company with AI-led growth trajectory and binding multi-year revenue visibility.

Note: No appendix table required—key figures are embedded above.