[Click eStock] "SK Hynix, Q2 Price Increase Gains Momentum... Target Price Raised"

[Asia Economy Reporter Oh Ju-yeon] KB Securities on the 17th said about SK Hynix, "Due to strong demand centered on DRAM, an upward shift in average selling price (ASP) is expected from the first quarter, and with the continued rise in NAND ASP, the visibility of a profit turnaround in the NAND segment has expanded," raising the target stock price from 97,000 KRW to 125,000 KRW while maintaining a 'Buy' investment rating.

Researcher Kim Dong-won stated, "SK Hynix is expected to attempt price increases from the first quarter as servers drive memory demand," adding, "The DRAM ASP in the first quarter is expected to turn upward for the first time in six quarters since the third quarter of last year due to inventory normalization, and NAND ASP is also expected to continue its upward trend in the first quarter." He particularly explained that in 2020, with limited memory supply, the ASP increase will lead to improved performance.

Accordingly, this year’s DRAM operating profit is estimated to increase by 26% year-on-year to 7.3 trillion KRW, and NAND operating profit is expected to turn profitable from -2.7 trillion KRW in 2019 to 524.5 billion KRW.

Researcher Kim projected, "SK Hynix’s operating profit this year is estimated at 7.9 trillion KRW, and further upward revision of the consensus operating profit (7.3 trillion KRW) is expected."

Currently, in the first quarter, server DRAM demand is surging mainly in the US and China due to the expansion of OTT and 5G, which is expected to positively impact ASP. Additionally, an increase in the amount installed per device and limited production capacity will inevitably reduce NAND supply, leading to a high possibility of further inventory reduction and supply shortage for SK Hynix’s DRAM and NAND in the future.

Researcher Kim predicted, "Quarterly operating profit is expected to improve from the bottom in the fourth quarter of last year through the fourth quarter of this year, and from the second quarter, quarterly operating profit will recover to 1 trillion KRW for the first time in a year, entering a full-fledged performance improvement trend."

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