SK Hynix, Stock Plummets to March Levels Amid Weak Q3 Market Conditions

[Asia Economy Reporter Song Hwajeong] SK Hynix's valuation has fallen to March levels as its stock price recently dropped significantly due to a weak third-quarter business outlook.

According to the Korea Exchange on the 22nd, SK Hynix recorded seven consecutive days of decline before showing an upward trend the previous day. With the recent rise, it regained its position as the second-largest market capitalization, although on the 20th, it had briefly lost the second spot to Samsung Biologics.

The decline in SK Hynix's stock price is analyzed to be due to a weaker-than-expected third-quarter business environment. Choi Doyeon, a researcher at Shinhan Financial Investment, stated, "SK Hynix's second-quarter sales are expected to be 7.88 trillion won, down 8.5% from the previous quarter, and operating profit is expected to decrease by 38.3% to 1.2 trillion won, underperforming previous forecasts. Price negotiations between server companies and manufacturers have been tough, shipments have not been smooth, and due to macro demand slowdown, downstream companies are passing inventory burdens onto manufacturers." Choi added, "The decline in DRAM prices in the third quarter is expected to be larger than anticipated."

Among semiconductors, memory demand is particularly weak. Choi explained, "In the second quarter, server companies preemptively accumulated memory inventory fearing value chain disruptions caused by COVID-19, and in the third quarter, they are passing inventory onto manufacturers. The inventory buildup and price increases from the second quarter are being returned in the third quarter."

It is forecasted that stock price increases driven by momentum such as shipment recovery will only be possible in September to October. Fixed price increases are expected in the first half of next year, so it will take time to confirm a business recovery. Choi said, "Macro issues such as the spread of COVID-19 and the US-China trade dispute are also concerns. However, the stock price's further decline is expected to be limited, and it will likely find a bottom in the short term." He added, "The recent decline in DRAM spot prices has slowed, and consensus downward revisions have largely been completed. The current 12-month forward price-to-book ratio (PBR) is 0.88 times, similar to the March low (0.86 times) when COVID-19 fears were at their peak. It is a time to approach based on valuation attractiveness first."

This content was produced with the assistance of AI translation services.