[Click eStock] SK Hynix, This Year's Earnings Estimates Down... "Semiconductor Market Rebound Next Year"

[Asia Economy Reporter Ji Yeon-jin] Shinhan Financial Investment announced on the 13th that it has lowered its earnings estimates for SK Hynix and downgraded the target stock price to 128,000 KRW.

Choi Do-yeon, a researcher at Shinhan Financial Investment, said, "Generally, the stock price bottom is formed when all expectations for demand are removed and the supply constraint logic operates, resulting in a sharp drop in earnings consensus," adding, "Recently, earnings consensus adjustments have been progressing steeply, and through the earnings season, the stock market's focus is expected to shift downward from this year's second-half earnings to supply constraints explaining the business conditions in the first half of next year.” He continued, "The proactive adjustment of earnings consensus is leading the stock price into a phase outperforming the KOSPI."

SK Hynix's sales in the second quarter of this year increased by 18.1% quarter-on-quarter to 14.36 trillion KRW, while operating profit was 3.97 trillion KRW, slightly below market expectations. It is estimated that shipments fell short of expectations due to a decrease in orders at the end of the quarter. Due to concerns over an economic recession, set shipments fell below expectations, leading to increased inventory among downstream companies. Downstream companies are reducing order volumes compared to their original plans to alleviate inventory burdens. Consequently, manufacturers' inventories are also expected to increase in the third quarter. Prices of DRAM and NAND are expected to inevitably decline in the third and fourth quarters of this year, with price forecasts for DRAM and NAND expected to be -8% and -9%, and -9% and -10%, respectively, during this period.

SK Hynix's sales for this year are projected to increase by 31% year-on-year to 56.33 trillion KRW, and operating profit is expected to rise by 6.4% to 13.21 trillion KRW. Researcher Choi said, "The memory market is expected to rebound in the second half of next year when all inventories are depleted, and the second half of next year is forecasted to be a clear upward cycle, because 2023 is expected to have the most severe supply constraints historically." He added, "However, currently, demand is declining due to macroeconomic instability, and this is a painful period to confirm the extent of the decline. Once demand expectations are lowered, market attention will naturally shift to supply constraints."

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