Lee Jae-Yong, chairman of Samsung Electronics, has been acquitted in the appeals trial following the first trial on the allegations of unfair mergers between Samsung C&T and Cheil Industries, raising expectations that Samsung Electronics will actively use its cash to enhance its corporate value.
KB Securities maintained its investment recommendation of 'buy' and target price of 70,000 won for Samsung Electronics on the 4th. Samsung Electronics' closing price the previous day was 51,000 won.
Kim Dong-Won, a researcher at the Research Institute of KB Securities, noted that with the resolution of the chief executive's judicial risk that had continued over the past decade (2016-2025), Samsung Electronics is expected to enter a phase of reduced uncertainty.
He said, “As Lee Jae-Yong's judicial risk comes to an end, the return to management has become a reality,” and added, “Since Lee, who has been an unregistered executive since 2019, is expected to return as a registered director at the regular shareholders' meeting in March, responsible management will become possible.”
The Seoul High Court's Criminal Division 13 (Presiding Judge Baek Kang-Jin) ruled the previous day that all charges against Lee for unlawful trading and market manipulation under the Capital Markets Act, as well as business embezzlement, were not guilty. This is the same conclusion as the first trial.
Kim evaluated that the group control tower of Samsung Electronics could be quickly rebuilt. This suggests that Samsung Electronics may restart its efforts to enhance corporate value, which halted following the acquisition and merger (M&A) of Harman in 2016.
Kim said, “The end of the judicial risk that lasted for 10 years signifies Lee's active participation in management in the future,” and added, “It is anticipated that Lee will actively utilize Samsung Electronics' net cash of 93.3 trillion won (27.5% of market capitalization) to enhance corporate value.”
Kim proposed various ways to utilize cash, including additional share buybacks and cancellations beyond the 10 trillion won share buyback and cancellation announced last November, large-scale M&A, and the establishment of a joint venture (JV) with global companies in the artificial intelligence (AI) field.
Kim noted, “Currently, Samsung Electronics' stock price has a price-to-book ratio (PBR - market capitalization ÷ net worth) of 0.85, reflecting all negativity in advance, so the risk of a decline is limited. However, the upward potential is likely to increase,” and added, “There is a possibility that performance will improve based on the outcomes of memory semiconductors and foundry (contract semiconductor production).”
He added, “After confirming the performance low in the first quarter of this year, a step-by-step improvement in earnings is expected starting from the second quarter,” and anticipated that certifications for the 12-layer 5th generation high-bandwidth memory (HBM3E) and the completion of the 6th generation HBM4 development, along with large foundry orders, will be the driving force behind the stock price increase.