No Successor to KOSPI No.2 'SK Hynix' Next Year... "Stock Revival Signal"

[Asia Economy Reporter Lee Seon-ae] Will there be a new company to replace SK Hynix as the second largest market capitalization next year? The securities industry's outlook is 'No.' SK Hynix posted its best-ever performance in the third quarter, raising expectations that concerns about the semiconductor sector and theories of a stock price bottom may be overcome.

According to the financial investment industry on the 30th, the second largest market capitalization in the domestic stock market is important. It reflects the leading stocks and leading industries of the era, thus aligning with the rise and fall and trends of the KOSPI. In 2007, the second largest market capitalization in KOSPI shifted from Korea Electric Power Corporation to POSCO, in 2011 from POSCO to Hyundai Motor Company, and in 2017 from Hyundai Motor Company to SK Hynix.

In the past, a new second largest market capitalization in KOSPI emerged when the net profit of the new second largest company surpassed that of the existing second largest company. ① In 2006, POSCO's net profit was 3.2 trillion won, exceeding Korea Electric Power Corporation's 2.1 trillion won at the time; ② In 2010, Hyundai Motor Company's net profit was 5.3 trillion won, surpassing POSCO's 4.2 trillion won; ③ In 2017, SK Hynix's net profit was 10.6 trillion won, exceeding Hyundai Motor Company's 4.0 trillion won. This was the common background for the emergence of new second largest market capitalization companies.

Lee Jaeman, a researcher at Daishin Securities, emphasized, "It will not be easy for the current top market capitalization companies to surpass SK Hynix's net profit scale even until 2023."

Accordingly, concerns about the semiconductor industry's business conditions and slowing growth are inevitable, but the sector remains a leading industry in the Korean stock market. Additionally, many believe the current stock price is at a bottom. The researcher said, "Considering that SK Hynix's current 12-month expected price-to-earnings ratio (PER) is 6.3 times, which has fallen to the lower end of the PER range during the stock price decline phase, it is judged that we have entered a period requiring attention."

Target prices for SK Hynix are also being raised one after another. Recently, the company posted better-than-expected results, recovering the 100,000 won level and showing signs of a rebound. Securities firms had recently lowered target prices due to concerns about the memory semiconductor industry's business conditions, but some have started to raise target prices around the earnings announcement.

Daishin Securities, SangSangin Securities, NH Investment & Securities, and Eugene Investment & Securities have raised SK Hynix's target prices. Daishin Securities raised its target price the most, from 120,000 won to 135,000 won. NH Investment & Securities set the highest target price at 160,000 won.

However, concerns still exist due to unresolved external uncertainties. Meritz Securities lowered its target price from 160,000 won to 140,000 won, KTB Investment & Securities from 140,000 won to 130,000 won, and Mirae Asset Securities from 135,000 won to 118,000 won.

Kim Yangjae, a researcher at KTB Investment & Securities, said, "Recently, front-end set demand has slowed, and power shortages in China have disrupted set production." He added, "In fact, the PC and smartphone industries have been reducing their 2022 business plans." He continued, "The price-to-book ratio (PBR) valuation of 1.0 times in the 2022 estimates is attractive, but it is judged that it is somewhat early for full-scale bottom buying," and "While SK Hynix's fundamental improvement is valid, concerns about expanding domestic and international uncertainties remain."