[Into the Stock] Promising but... SK Hynix Faces Continuous Downturn

3Q Outlook Is Bright, but Future Demand Uncertainty Holds Back Growth

10nm-class 4th generation DRAM mass-produced by SK Hynix using Extreme Ultraviolet (EUV) technology. (Provided by SK Hynix) [Image source: Yonhap News]

[Asia Economy Reporter Minwoo Lee] Despite SK Hynix's strong performance in the second quarter of this year, its stock price has been falling continuously. This is due to concerns over increased costs from investment burdens amid uncertain demand forecasts. Analysts say that the uncertainty about next year's demand must be resolved for the company to aim for a rebound.

Strong 2Q Performance, Positive 3Q Outlook

According to the Financial Supervisory Service's electronic disclosure system on the 30th, SK Hynix recorded consolidated sales of 10.3217 trillion KRW and operating profit of 2.6946 trillion KRW in the second quarter of this year. These figures represent increases of 19.9% and 38.4%, respectively, compared to the same period last year. Sales exceeded market consensus estimates by 4.6%, indicating generally solid results. This is the first time in three years that quarterly sales have surpassed 10 trillion KRW. Despite weak mobile demand due to the spread of COVID-19 and shortages of application processors (AP), steady demand for PCs and graphics, along with the beginning of server demand recovery, contributed to the improved performance.

With semiconductor prices remaining strong, the third quarter is also expected to show good results. According to financial information provider FnGuide, SK Hynix's third-quarter consolidated earnings forecast projects sales of 11.7398 trillion KRW and operating profit of 4.1094 trillion KRW. These represent increases of 44.4% in sales and 216.2% in operating profit compared to the same period last year, indicating strong performance.

Stock Price Declines... Market Focus Beyond the Second Half

Although expectations might have been reflected, the stock price has been declining continuously. As of 1:36 PM on the day, it recorded 113,000 KRW, down 0.88% from the previous day. On the 28th, it fell to an annual low of 112,500 KRW. This contrasts with the record high of 150,500 KRW reached on March 2. Since recording 147,000 KRW on April 6, the stock price has generally trended downward, falling 20.3% (closing price basis) during this period. This is in stark contrast to the KOSPI, which rose 3.4% over the same period.

Despite the positive third-quarter outlook, the market's attention is focused beyond that, expressing concerns. Eugene Investment & Securities pointed out that there is a gap between the sales trends of set manufacturers and semiconductor companies, which is problematic.

Currently, uncertainties remain about whether the second half will proceed smoothly with strong corporate PC demand, how significantly new products will adopt high-capacity memory in mobile demand, and whether server demand can respond well despite variables such as Intel's new CPU production delays. Researcher Seungwoo Lee of Eugene Investment & Securities said, "The performance of these companies cannot diverge in the long term, so the market inevitably has to endure noise," adding, "It is also burdensome that other semiconductor companies that recently announced earnings commonly mentioned cost increases due to investment burdens." If demand forecasts are uncertain but costs are definitely rising, it becomes difficult to assign a high valuation to semiconductor companies. Ultimately, resolving this demand uncertainty is necessary for a stock price rebound.

‘Supercycle’ Reproduction Difficult... Adapting to a New Era is Crucial

There is a growing outlook that the semiconductor cycle will take a new form with reduced amplitude and wavelength compared to the past. This means the likelihood of a so-called 'supercycle' emerging has decreased. Additionally, one-time cost burdens related to Intel's NAND business acquisition in the first half of next year must be considered. There is skepticism about whether the company can achieve results that meet market expectations.

However, it is reassuring that Texas Instruments, which significantly influences the global semiconductor market, had an inventory turnover of 111 days at the end of the second quarter, which is lower than the company's target range of 130 to 190 days, indicating no burden. Kyungmin Kim, a researcher at Hana Financial Investment, explained, "Since suppliers' inventory levels are low, the memory semiconductor sector is expected to avoid a hard landing and instead have a soft landing, benefiting from the peak season effect starting from the second quarter of next year." He added, "However, the stock market does not welcome such a soft landing, so SK Hynix's stock price is expected to remain sideways."

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