Korean Memory Chip Valuations Near Fair Levels, Profit Expectations May Be Too Optimistic, Says TS Lombard

According to TS Lombard research released July 22, Korean memory chip valuations have approached fair levels, but market expectations for storage companies' future profitability may remain overly optimistic. DRAM contract prices saw quarter-over-quarter increases of 93-98% in Q1, which declined to 58-63% in Q2, with TrendForce predicting a further slowdown to 13-18% in Q3. Spot market conditions have turned sideways, with DRAM and HBM prices beginning to decline.

Market consensus expects memory company EPS growth of 36-40% in 2027, while TrendForce estimates unit supply growth of only 15-20%. Long-term supply agreements provide price support but limit further increases, with protections weakening over the next year. TS Lombard notes that Samsung Electronics and SK Hynix stock prices have largely reflected scenarios where 2027 profits are 40-50% below market consensus, suggesting valuations are near fair value.