More Than 80% of Negative Factors Already Priced In... When Will SK Hynix Rebound?

Earnings Slowdown Expected from Q4... Bottom Anticipated in Q2 Next Year
"Stock Price May Enter Rising Phase from Year-End Due to Optimism"

SK Hynix's 10-nanometer class 4th generation DRAM mass-produced using EUV (Provided by SK Hynix)
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] SK Hynix's third-quarter earnings are expected to be favorable, but the stock price continues to struggle. Concerns about the memory market downturn have focused attention on the outlook from the fourth quarter onward. In this situation, there is a forecast that the bottom will be reached in the second quarter of next year, with a rebound starting from the end of this year.

On the 2nd, Hanwha Investment & Securities projected that SK Hynix will record consolidated sales of 11.819 trillion KRW and operating profit of 4.08 trillion KRW in the third quarter of this year. This is expected to meet the market consensus of sales of 11.7504 trillion KRW and operating profit of 4.062 trillion KRW. It will be the first time in three years since 2018 that the company's quarterly operating profit surpasses 4 trillion KRW. This result reflects rising memory prices and strong shipment volume due to the peak season. In particular, the NAND segment is estimated to turn profitable due to a 16% increase in shipments compared to the previous quarter and a 7% rise in average selling price.

Nevertheless, the stock price has yet to rebound significantly. This is because uncertainty remains regarding the formation of a bottom in DRAM prices. Hanwha Investment & Securities expects SK Hynix's earnings to begin slowing from the fourth quarter of this year and to form a bottom in the second quarter of next year. This is analyzed as entering a period of memory price decline.

However, this downward phase is expected to last for three quarters, shorter than the past six to eight quarters. Researcher Sunhak Lee of Hanwha Investment & Securities said, "The DRAM inventory held by SK Hynix will be very low at around one to two weeks by the end of this year, and capital investment is also focused on process miniaturization, limiting wafer production capacity increases. Therefore, once customers finish adjusting their inventory, the market will switch back to an upward phase from the second half of next year."

Against this backdrop, Hynix's investment opinion of 'Buy' is maintained, but the target stock price was lowered by about 22% from 180,000 KRW to 140,000 KRW. The closing price the previous day was 100,000 KRW. The researcher explained, "Although reflecting the memory price decline and entry into a down cycle, looking at the stock price pattern over the past three years, the stock price leads DRAM prices by more than six months, so the recommended buying period for the company is November to December. If approval related to Intel's NAND business acquisition is finalized, it will be even more positive, and the stock price will already start rising from the time when memory companies' capital investment plans become concrete toward the end of the year."

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