From '90 Billion Operating Loss' to '73 Billion Profit'... SK Hynix's Earnings Forecast Changed in 2 Months

SK Hynix's earnings outlook for the fourth quarter of last year has reversed completely over the past two months. While it was expected to record a loss close to 90 billion KRW two months ago, recent analyses suggest it likely posted an operating profit in the 70 billion KRW range. This indicates that the semiconductor recovery is progressing more strongly than initially anticipated.

SK Hynix Icheon Campus Entrance View / Photo by SK Hynix

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According to the semiconductor and securities industries on the 23rd, based on securities firms' forecasts aggregated by financial information provider FnGuide, SK Hynix is expected to have recorded sales of 10.4447 trillion KRW in the fourth quarter of last year, a 36.14% increase compared to the same period the previous year. If this holds true, it would be the first time since the third quarter of 2022 (10.9829 trillion KRW), when the semiconductor market downturn began to significantly impact earnings, that sales have surpassed the 10 trillion KRW mark.

Using the same criteria, the operating loss forecast for the fourth quarter of last year stands at 89.6 billion KRW. Considering that losses in the trillion KRW range continued throughout the first to third quarters of last year, it is expected that the deficit in the fourth quarter will have significantly narrowed.

Recently, there has been growing emphasis on the possibility that SK Hynix turned profitable in the fourth quarter. The operating loss forecast of 89.6 billion KRW is an average of securities firms' forecasts over the past three months, but forecasts made within the last month actually predict an operating profit of 72.1 billion KRW.

Go Young-min, a researcher at Daol Investment & Securities, stated, "A clear earnings recovery is expected in the fourth quarter due to the rebound in prices of legacy products and the improved sales mix focused on high value-added products such as High Bandwidth Memory (HBM) 3 and high-capacity Double Data Rate (DDR) 5." He added, "The resilient profitability improvement trend of DRAM is expected to continue." Furthermore, he noted, "Following the rapid recovery seen in DRAM, it is anticipated that NAND flash has also passed the bottom of the market."

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Within the semiconductor industry, SK Hynix is expected to continue an upward earnings trend this year alongside the recovery of the semiconductor market. Although detailed forecasts vary by securities firm, the majority predict SK Hynix's operating profit this year will reach around 10 trillion KRW, surpassing the deficit of 8.0764 trillion KRW recorded in the first to third quarters of last year. Hanwha Investment & Securities forecasts 9.277 trillion KRW, Korea Investment & Securities projects 10.759 trillion KRW, and SK Securities estimates 11.084 trillion KRW.

The expectation that memory prices will rise this year also supports the positive earnings outlook. Market research firm TrendForce predicts that, assuming the memory industry makes cautious production cuts, prices for DRAM and NAND will continue to increase this year. Specifically, in the first quarter, DRAM and NAND prices are expected to rise by 13-18% and 18-23%, respectively, compared to the previous quarter. Additionally, DRAM prices are forecasted to increase by 8-13% during the seasonal peak in the third and fourth quarters.

SK Hynix is scheduled to announce its fourth-quarter earnings for last year on the 25th. Attention is focused on whether the company will reveal any changes in its memory production cut strategy during the conference call. Although the company has maintained production cuts since the fourth quarter of 2022, the recent recovery in the market has led them to weigh the timing of ending these cuts. It is also anticipated that SK Hynix may share plans regarding the mass production and business strategy of HBM3E, the latest fifth-generation HBM product. The company previously announced in August last year that it had begun supplying HBM3E samples to customers.

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