[Click eStock] "SK Hynix to Start Memory Price Adjustment from Q4...Target Price Downgraded"

[Asia Economy Reporter Park Jihwan] Cape Investment & Securities maintained a 'Buy' rating on SK Hynix, stating that memory prices will enter a downward trend from the fourth quarter and the off-season will continue until the first half of next year, but lowered the target price to 120,000 KRW.

Park Seongsun, a researcher at Cape Investment & Securities, said, "SK Hynix's third-quarter sales are expected to be 11.79 trillion KRW, and operating profit 4.07 trillion KRW, up 14.3% and 51.2% respectively from the previous quarter," adding, "Although PC demand, which benefited from COVID-19, has entered a slowdown phase, server demand remains solid in the third quarter, and mobile is expected to perform better than market concerns."

The quarterly operating profit of over 4 trillion KRW is the highest since the fourth quarter of 2018, but the impact of the third-quarter results on the stock price is expected to be limited. This is because the market is already reflecting the DRAM price decline starting from the fourth quarter, given the nature of memory stock prices that lead the industry trend.

Researcher Park emphasized, "Set production disruptions continue due to shortages of non-memory components, and PC demand is slowing down with the expansion of vaccine coverage." He explained that while server demand remains solid, price resistance is evident as price negotiations with clients are delayed.

On the other hand, supply has expanded more than the market expected at the beginning of the year, and competitors are showing aggressive supply. Park predicted, "Memory price weakness is expected to appear from the fourth quarter of next year when demand slows down," and "this off-season will continue until the first half of next year."

However, this price decline is expected to be only a short-term adjustment. At the time of the down cycle entry in 2018, suppliers' DRAM inventory was about 4 weeks, but currently, it is only about 1 week. Park said, "Server customers' inventory levels are also not high, so the inventory adjustment period will not be long," adding, "The cleanrooms for capacity expansion planned in 2022 are also insufficient, so the increase in DRAM supply is expected to be limited."

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