When Will SK Hynix's Stock Price Recover?

[Asia Economy Reporter Ji-hwan Park] SK Hynix's stock price continues to struggle. Due to ongoing poor performance caused by falling prices of its main product category, memory semiconductors, there are no signs of a stock price rebound. Experts predict that from as early as the fourth quarter, major clients will begin restocking, causing memory semiconductor prices to rise again and profitability to improve.

According to the Korea Exchange on the 14th, SK Hynix recorded a year-to-date stock return of minus (-) 17% as of the closing price on the 11th, ranking among the top 10 KOSPI market capitalization stocks. During the same period, LG Chem (122%) and Kakao (147%) showed gains exceeding 100%. Samsung SDI rose 82%, Samsung Biologics 76%, Celltrion 65%, and NAVER 64%, all showing unusually high increases. Samsung Electronics, grouped in the same industry, also rose 6%.

The main reason for SK Hynix's weak stock price is the sluggish memory semiconductor market. SK Hynix is expected to record sales of 7.795 trillion KRW and operating profit of 1.234 trillion KRW in the third quarter. Compared to the previous quarter, sales decreased by 9.4% and operating profit by 36.6%. This is closely related to the gradual decline in memory semiconductor prices. The average selling prices (ASP) of DRAM and NAND flash in the third quarter are expected to fall by 8% and 9%, respectively, compared to the previous quarter.

Additionally, the industrial landscape changes triggered by the COVID-19 pandemic also play a role. Industries that once supported the domestic economy, such as automobiles, steel, and construction, have quietly lost prominence, while the status of industries like batteries, biotechnology, internet, and gaming has grown. The semiconductor sector, which led the market for years, is no exception. In fact, among the top 10 KOSPI market capitalization stocks, three companies have significantly changed compared to last year. Hyundai Mobis, POSCO, and Samsung C&T have fallen out of the top 10, while Kakao and Samsung SDI have newly entered.

The financial investment industry generally views SK Hynix's current stock price level as already reflecting the worst-case scenario. It is expected that memory semiconductor prices will rebound as early as the fourth quarter.

Major clients such as cloud companies are expected to have depleted the semiconductor inventory they had secured in preparation for COVID-19 during the third quarter and will resume purchasing semiconductors. From the fourth quarter, when inventory levels normalize among upstream companies, recovery signals due to increased shipments are expected to appear, leading to a rebound in memory semiconductor prices as well.

Choi Do-yeon, a researcher at Shinhan Financial Investment, stated, "We believe the bottom of SK Hynix's stock price has already passed, and stock price increases due to shipment recovery are expected in September to October," adding, "Although macro issues such as the spread of COVID-19 and the US-China trade dispute remain concerns, the possibility of further stock price declines appears limited."