[Click eStock] "SK Hynix, Earnings Decline Until Q1 Next Year... Target Price Down 38%"

[Asia Economy Reporter Kwon Jaehee] BNK Investment & Securities maintained a 'Buy' rating on SK Hynix on the 15th, while lowering the target price by 37.6% to 128,000 KRW.

Due to a sharp decline in demand, SK Hynix's sales and operating profit forecasts for the third quarter of this year are inevitably being revised downward. DRAM demand in the second quarter was down 12% compared to the previous quarter, and NAND demand fell by 14%. Accordingly, the average selling price is also expected to decrease by 17% for both DRAM and NAND. Reflecting this, the third-quarter sales forecast has been revised down from 13.5 trillion KRW to 10.5 trillion KRW, and operating profit from 3.49 trillion KRW to 1.84 trillion KRW.

Lee Minhee, a researcher at BNK Investment & Securities, stated, "There are still no signs of final demand improvement, so the inventory increase trend is expected to continue until the end of the year," adding, "Due to price declines, quarterly earnings are expected to plunge until the first quarter of next year."

The decline in the memory market is occurring at the fastest pace ever recorded. In July, the global memory market size was 7.8 billion USD, a 50% drop in just two months from the peak in May. This speed is more than twice as fast as the five-month periods during the 2000 dot-com bubble burst and the 2008 financial crisis. There is a possibility of production cuts after the end of the year, and supply-demand improvement is expected from the second quarter of next year due to demand elasticity recovery following the sharp price drop and DDR5 replacement demand. However, unlike during the financial crisis, it is difficult to expect large-scale economic stimulus measures from the US and China, so only limited demand recovery is anticipated next year.

The researcher interpreted, "Despite the sharp downward revision of earnings in the second half, SK Hynix's stock price has already priced in the economic slowdown cycle and is positioned at a historic low," adding, "Although earnings uncertainty remains high for the time being, the timing of inventory indicator improvement will likely be a turning point for a stock price rebound."

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