Morgan Stanley: Lowers Samsung Electronics' target price to 400,000 won, suggests accumulating shares during weak stock price periods.

J.P. Morgan maintains an "Overweight" rating on Samsung Electronics but has lowered the target price from 480,000 KRW to 400,000 KRW to reflect the current market environment and the narrative of the memory downcycle. The firm noted that management provided clear long-term contract information during the earnings call and expressed confidence in the improvements in HBM and foundry execution capabilities, while maintaining an optimistic outlook. Management revealed that 60% to 70% of future memory capacity is already secured by long-term contracts, structured on a five-year basis, with an option to extend for an additional year each year, and includes a minimum price guarantee to ensure sufficient returns and incentivize investment. They also mentioned that long-term contracts have been signed with five major CSP customers, and negotiations are ongoing with another five major AI customers. By the end of the second quarter, over a quarter of the long-term contract prepayments had been received. The firm believes that Samsung is making good progress with HBM4 and HBM4E samples, expecting HBM4 sales to grow 3% in the second half of this year, accounting for 60% of HBM sales by 2026, and anticipates that HBM market share will align with the overall DRAM market share by 2027. In the foundry segment, Samsung recently secured approximately $200 billion in orders from AVGO and continues to win 2nm orders, including Broadcom's N/W chips, Samsung's own SoC, and Tesla's AI chips. The firm expects a significant improvement in the quality of the foundry portfolio. Management anticipates that eSSD sales will exceed 60% this year, with QLC bit shipment volumes expected to double in the second half compared to the first half, and V10 NAND has entered mass production in August. The firm believes that the risk-return profile within a 12-month investment period could become highly attractive and suggests that investors accumulate shares during periods of stock price weakness.