Samsung Electronics (005930 KP) Buy: 3Q26 preliminary – better than feared

Samsung announced solid 3Q26 preliminary results, with operating profit of KRW107trn (+20% q-o-q, +780% y-o-y), broadly in line with HSBCe and consensus, on sales of KRW195trn (+14% q-o-q, +127% y-o-y). We think despite the negative impact of KRW appreciation, more solid DRAM/NAND price hikes of +18% q-o-q (previously +16%) and peak-season OLED earnings, which lifted margin to 14% from 9% in 2Q26, led to better-than-feared results. Meanwhile, higher component costs, including memory and APs, pushed smartphone into a loss in 3Q26. Soaring PC DRAM prices driven by more capacity allocation to HBM and SO-CAMM2 support overall DRAM price increases alongside the transition to HBM4, while NAND price increases should be supported by soaring eSSD demand, expected to account for 46% of total demand by 2028 (up from 28% in 2025). We lift our DRAM ASP estimates to +7% q-o-q and expect 4Q26e OP of KRW123trn. We expect foundry to turn around from 2028. Factoring in a better memory price trend, we ra