[Click eStock] "SK Hynix, Profit Growth Slows but Stock Price Nears Bottom"

From Next Year, Performance Slowdown Is Inevitable... PER and PBR at Bottom Levels

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Although SK Hynix's profits are expected to enter a slowdown phase, its stock price is approaching the bottom range, according to an analysis.

On the 14th, Eugene Investment & Securities lowered SK Hynix's target stock price by about 17.2% to 120,000 KRW, citing this background. The closing price the previous day was 92,000 KRW. The investment opinion 'Buy' was maintained.

SK Hynix's third-quarter performance is expected to be solid, but a slowdown is anticipated going forward. The third-quarter results are forecasted at consolidated sales of 11.802 trillion KRW and operating profit of 4.015 trillion KRW, representing increases of 45% and 209% respectively compared to the same period last year. Bit growth rates are expected to be 1% for DRAM and 18% for NAND flash. Average selling prices are assumed to rise by 6% and 5%, respectively. Total operating expenses for the third quarter are estimated at 7.787 trillion KRW, about 260 billion KRW higher than the previous quarter.

For the fourth quarter, sales of 11.804 trillion KRW and operating profit of 3.907 trillion KRW, similar to the third quarter, are expected. Researcher Seungwoo Lee of Eugene Investment & Securities explained, "DRAM and NAND prices are expected to turn downward in the fourth quarter. However, due to the weak Korean won, the effect of DRAM price declines will be offset, so sales and operating profit will be similar to or slightly lower than the third quarter."

A slowdown in performance is expected from the first half of next year. Lee said, "Although this scenario was anticipated since the first half of this year, the China Evergrande Group crisis, power shortages, concerns over slowing U.S. growth, and frictional energy price surges amid the carbon neutrality realization process have necessitated adjustments to the 2022 global economic growth trajectory and corporate profits."

SK Hynix is expected to continue double-digit sales growth next year due to the acquisition effect of Intel's NAND business unit. However, concerns over a slowdown in economic recovery have increased doubts about IT durable goods consumption. Additionally, considering various cost pressures and increased expenses from integrating Intel's NAND business unit, profit growth is not expected to be easy.

Against this backdrop, SK Hynix's expected performance for next year is estimated at sales of 49.466 trillion KRW and operating profit of 9.869 trillion KRW. Sales are expected to increase by 17% compared to this year's forecast, but operating profit is expected to decrease by 17%. Compared to previous forecasts, these figures were lowered by 4% and 18%, respectively. Lee said, "However, the current stock price is at a price-to-earnings ratio (PER) of 1.1 times based on this year's expected performance and a price-to-book ratio (PBR) of 1.0 times based on next year's expected performance, close to the PBR bottom in the first half of 2019. We judge that the stock price and valuation are at the bottom or oversold phase in the mid-to-long term."

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