[Click eStock] "SK Hynix, Earnings Estimates Raised... Target Price 200,000 Won"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment raised the target price for SK Hynix from 190,000 KRW to 200,000 KRW on the 5th, expecting the stock price to continue rising due to a steep upward revision in future earnings forecasts. The investment opinion was maintained as 'Buy.'

Choi Doyeon, a research fellow at Shinhan Financial Investment, stated, "We are revising upward the operating profit forecasts for 2021 and 2022 to 12.2 trillion KRW and 21.3 trillion KRW, respectively, by 1.1% and 29.4%. We expect the earnings peak of this upcycle to be in the second quarter of 2022, as supply constraints intensify due to the transition to DDR5 and the application of NAND double stacking, resulting in the 2022 annual operating profit surpassing the peak in 2018." He explained that the target price was raised reflecting this outlook.

The pace of DRAM price increases is expected to exceed market expectations. The DRAM spot price has risen 75% from its bottom. The gap between spot and fixed prices has widened to 33%. Inventory turnover is only 44%, which is the upper limit of the previous cycle. Research fellow Choi said, "This is evidence that there is still significant room for DRAM fixed price increases," adding, "We are revising upward the quarterly DRAM average selling price (ASP) growth for 2021 to 7% in Q1, 10% in Q2, 14% in Q3, and 9% in Q4."

Server demand has confirmed its bottom, and mobile and PC demand are strong, so once the DDR5 transition begins from the second quarter of this year, the supply constraints and price premium effects could cause the DRAM ASP growth to exceed expectations, according to the analysis.

NAND is also expected to rebound in the second quarter of this year. Research fellow Choi said, "NAND prices will start to rebound in Q2 and rise strongly from Q3," adding, "NAND companies will focus on recovering the market conditions, so investment policies will remain conservative for some time after the first half of this year."