[Click eStock] "SK Hynix, Server Demand and DRAM Prices Weaker Than Expected"

Kiwoom Securities Report
Q3 Operating Profit 1.2 Trillion KRW, Q4 681.8 Billion KRW

[Asia Economy Reporter Minji Lee] Kiwoom Securities forecasted on the 11th that SK Hynix's performance decline will continue in the second half of the year due to sluggish DRAM shipments caused by decreased server demand. The investment opinion of "Buy" and the target stock price of 105,000 KRW were maintained.

In the third quarter, SK Hynix is estimated to record an operating profit of 1.2 trillion KRW, a 39% decrease compared to the previous quarter. Sales are expected to decline by 12% during the same period to 7.6 trillion KRW, slightly below market expectations. Although laptop demand exceeds expectations, weak demand in servers and mobile continues.

For DRAM, the company is expected to record shipment volumes below its forecast. NAND is projected to experience a higher-than-expected price decline. Although DRAM spot prices have been rising daily recently, this is insufficient to lead to an increase in DRAM fixed prices. By business segment, DRAM's operating profit is estimated to decrease by 39% from the previous quarter to 1.4 trillion KRW. The NAND segment is expected to continue operating at a loss, with an operating deficit of 143 billion KRW.

SK Hynix is expected to record an operating profit of 681.8 billion KRW in the fourth quarter, indicating that the performance decline will persist. Park Yoo-ak, a researcher at Kiwoom Securities, stated, "This is because the weaker-than-expected server demand is expected to drive DRAM price declines," adding, "While server demand remains strong from Alibaba and Tencent in China, it is affected by reduced investments from ByteDance, Microsoft, and Google due to the intensifying US-China trade dispute, as well as Facebook's reduced investment caused by decreased advertising revenue." Despite the launch of new console games in the fourth quarter, the NAND segment is expected to continue operating at a loss due to weak demand for mobile products.

Following changes in DRAM manufacturers' investment plans in the second half of the year, weak demand centered on servers and mobile has delayed the timing of DRAM supply-demand improvement. However, the anticipation of Intel's new server platform launching early next year appears to be affecting the current weak server demand, and it is expected that the market conditions will clearly improve after the end of this year.

Researcher Park Yoo-ak explained, "Since negative factors such as deteriorating DRAM demand, price declines, and downward revisions of performance expectations have overlapped, we need to align with the subsequent improvement in the DRAM market," adding, "We should gradually increase our weighting in SK Hynix with a long-term perspective."

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