[Into the Stock] SK Hynix Hit by Cold Wave... "Next Year's Deficit Will Worsen"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] SK Hynix's stock price has once again been stuck in the 80,000 won range. This is due to weakened investor sentiment amid forecasts of a fourth-quarter loss. Market experts expect the scale of the loss to increase further in the first quarter of next year.

As of 9:05 a.m. on the 21st, SK Hynix was trading at 87,400 won, down 1.13% (1,000 won) from the previous trading day. The stock price in the second half of this year (July 1 to November 18) rose by 0.6%, from 87,500 won to 88,100 won. It is essentially flat. Despite net purchases of 143.9 billion won and 51.4 billion won by foreigners and institutions respectively this month, the stock price failed to gain momentum.

The biggest reason for the sluggish stock price is the loss forecast due to the semiconductor market conditions. This is because the inventory adjustment intensity of semiconductor server customers has been higher than expected, and the peak season effects for notebooks and smartphones have fallen short of expectations.

As front-end demand decreases, shipments and product prices have entered a vicious cycle of decline. Kiwoom Securities expects fixed prices for DRAM and NAND in the fourth quarter of this year to fall by 24% and 20% respectively compared to the previous quarter. Hanwha Investment & Securities also estimates that DRAM and NAND prices will drop by 28% and 30% respectively.

Of course, earnings forecasts are also bleak. According to the SK Hynix earnings consensus compiled by FnGuide, an operating loss of 31.4 billion won is expected in the fourth quarter, marking a turnaround to a loss compared to the previous year. Sales are expected to decrease by 24% to 9.031 trillion won. Operating losses in the first quarter of next year are projected to increase to 671.3 billion won.

Kim Kwang-jin, a researcher at Hanwha Investment & Securities, said, "Next year's hardship period is the critical point," adding, "The operating loss for next year is expected to be 2 trillion won, which would be the largest loss since 2008." He analyzed that DRAM will show a clear improvement in earnings from the third quarter of 2023, bottoming out in the second quarter due to the resumption of customer purchases, but NAND is unlikely to return to profitability next year.

The stock price is also expected to remain weak for the time being. Park Yoo-ak, a researcher at Kiwoom Securities, said, "DRAM, whose inventories among suppliers are rapidly increasing, will see intensified market share competition among competitors by the end of this year, limiting the short-term ceiling of the stock price," and analyzed, "SK Hynix's stock price is expected to rise from the first quarter of next year, when signs of improvement in the DRAM market are expected to be observed, after repeated fluctuations at the current level."

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