SK Hynix's Q3 Operating Profit Halved... Yet Stock Price Rose

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] SK Hynix, which recorded an 'earnings shock' in the third quarter this year, closed slightly higher on the 26th. This appears to be due to semiconductor stocks rising across the board in the U.S. stock market, coupled with expectations of improved profitability from semiconductor production cut plans. Securities firms forecast that the semiconductor industry will gradually improve from the second half of next year.

On the day, SK Hynix announced its third-quarter earnings for this year, stating that operating profit was preliminarily estimated at 1.6556 trillion KRW, down 60.3% compared to the same period last year. Net profit for the same period also decreased by 66.7% to 1.1027 trillion KRW. Sales recorded 10.9829 trillion KRW, down 7.0% from the same period last year.

SK Hynix diagnosed that the earnings shock was influenced by the worsening memory semiconductor market due to weak demand, as well as economic uncertainties such as inflation. As the global economy deteriorated, consumer sentiment shrank, leading to a decrease in shipments from companies producing PCs and smartphones, which are major suppliers of memory semiconductors.

Despite the third-quarter earnings being halved compared to last year, SK Hynix's stock price rose slightly. On the 26th, SK Hynix closed at 93,900 KRW, up 0.43% (400 KRW) from the previous trading day. Although the earnings announcement was made before the market opened, the stock price surged to as high as 95,500 KRW during the session.

[Image source=Yonhap News]

The rebound seems to have been influenced by the rise of major semiconductor stocks in the U.S. stock market the previous day. On the 25th (local time), the Philadelphia Semiconductor Index, which significantly affects the stock prices of domestic semiconductor companies, closed at 2,404.69, up 2.26% from the previous trading day. The index rose 8.81% over the past five trading days. During the same period, major U.S. semiconductor stocks such as Nvidia (11.71%), AMD (7.28%), Qualcomm (7.60%), and Intel (6.45%) also showed upward trends.

Looking at the investors by type, foreign investors' buying was notable. Foreign investors net purchased SK Hynix shares worth 86.7 billion KRW on the day. This contrasts with individual and institutional investors, who sold SK Hynix shares worth 63.3 billion KRW and 22.6 billion KRW, respectively.

The semiconductor production cut plan also partially thawed the frozen investment sentiment. During the conference call on the day, SK Hynix announced plans to reduce investment by more than 50% next year while cutting production mainly for low-profit products. They explained that inventory levels could continue to soar until the first quarter of next year, so they intend to maintain the investment reduction and production cut policy to normalize market supply and demand balance. It is estimated that investors showed expectations that adjusting semiconductor production could resolve supply-demand imbalances while improving profitability.

Securities firms forecast that the semiconductor market will show a gradual recovery from the second half of next year. Dongwon Kim, a researcher at KB Securities, said, "SK Hynix's performance is expected to be sluggish until the first half of next year due to continued declines in average selling prices (ASP) of DRAM and NAND and inventory adjustments," but added, "From the second half of next year, a gradual recovery trend is expected due to limited supply increases in the global memory industry and memory inventory accumulation demand centered on servers."

Along with expectations for market improvement, advice was given that it is worth making low-price staggered purchases. Myungseop Song, a researcher at Hi Investment & Securities, said, "If SK Hynix's proactive recession response strategy becomes a natural trend in the industry, there is hope that this recession cycle could end faster than expected," and advised, "From a long-term investment perspective, staggered buying whenever the stock price falls is a high-probability investment."

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