Selling strength instead of buying it. The recent sell-off appears more to do withsentiment rather than fundamentals, driven by (in our view): (i) a wall of cynicismon the memory cycle, (ii) Samsung re-setting some of the excitement for Q3, asthey would normally do, and (iii) tactical rotation worries with stock moves toall-time highs. We believe Samsung's memory and mobile supply chain is (still) ontrack to exceed organic revenue growth expectations in 2H and next year, andremains well positioned to grow faster than its competition. Specifically, theperceived higher customer inventories in Q3and double ordering that havetypically amplified past corrections are not present today.    Quarterly volatility, but not a shift in trend: The breadth of earnings estimaterevisions has decelerated in the last three months, justifying the sell-off andsuggesting diminished prospects of earnings/sales upside. However, there is aclearer differentiation between fundamentally weaker (LG) and strongercompanies (Samsung), and 2H17may play out differently. We are seeing furtherdemand strength in nearly every market vertical that consumes memory,including servers, smartphones and steady PC. We had budgeted for SamsungGS8deceleration (which is expected), iPhone OLED delays in Q3, and Chinesesmartphone weakness – none of these issues is new.    Separating investment from trades: We feel most comfortable with our OWratedSamsung stocks and SK Hynix. Samsung SDI (OW) earnings have becometurbocharged with battery share gains and stabilized EV complementing equitygains from Samsung OLED stake. For LGD (UW), the mix shift to small panels in2H will challenge pricing resilience, and OLED start-up cost will weigh on margin.We are more cautious on LGE (UW), in view of smartphone product cycleheadwind, and as self-help benefits are now past. An already high EPS consensusshould temper the earnings upside at LG Innotek (EW).    Forecasts and PT changes: We raise price targets for LGI, SDI and SDS andreduce our Techwin and LGD price targets post 2Q17results. We also fine-tuneour LGE and Seoul Semi numbers. Across our industry coverage, we adjust ourforecasts for 3Q17organic growth to +27% (from +34%) and OP margin to 18.9%(from 20.1%). For 2017, we forecast industry organic growth of 20% and OPmargin of 19% (up 8pp YoY).

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