[Click eStock] SK Hynix: Crisis and Opportunity

[Asia Economy Reporter Hwang Junho] Kiwoom Securities maintained the target price for SK Hynix on the 28th. Although SK Hynix's stock price fell to a price-to-book ratio (PBR) of 1.0 due to expanding economic uncertainties, a stock price rebound is expected following a market turnaround.

SK Hynix's sales in the first quarter of this year amounted to 12.2 trillion KRW, with an operating profit of 2.9 trillion KRW. The prices of DRAM and NAND flash showed a better-than-expected trend, surpassing market expectations. However, operating profit fell short of expectations due to the reflection of unexpected one-time costs (3.8 billion KRW in sales warranty provisions). Kiwoom Securities estimated that by business segment, DRAM recorded sales of 8 trillion KRW and operating profit of 3.1 trillion KRW, while NAND recorded sales of 3.8 trillion KRW and an operating loss of 300 billion KRW.

The outlook for the second quarter of this year is also not bad. Kiwoom Securities forecast sales of 14.6 trillion KRW and operating profit of 4.2 trillion KRW, exceeding the market consensus (operating profit of 3.9 trillion KRW). DRAM prices are expected to maintain the previous quarter's level due to a reduction in customers' inventory holdings, and shipments are projected to surge by 14% quarter-on-quarter due to strong server demand. NAND is expected to see about a 20% increase in shipments compared to the first quarter, reflecting the consolidation effect of Solidigm and the seasonal demand effect. Prices are anticipated to rise sharply by 7% QoQ, reflecting recent industry fluctuations.

Park Yu-ak, a researcher at Kiwoom Securities, stated, "Stock prices, which are expected to be weak until the early to mid-second quarter, are forecasted to rebound," adding, "Strong server demand is appearing in the second quarter, and with an increase in long-term supply agreements (LTA), the possibility of a rise in fixed DRAM prices is increasing."

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