[Click eStock] SK Hynix, Earnings Expectations... Target Price Raised

[Asia Economy Reporter Junho Hwang] Hyundai Motor Securities on the 21st raised the 6-month target price of SK Hynix from 145,000 KRW to 155,000 KRW.

Regarding overall performance, an operating profit below expectations is anticipated. Hyundai Motor Securities forecasted that SK Hynix's sales in the first quarter of this year will be around 11.3 trillion KRW, similar to previous estimates. However, operating profit is expected to be lower than previously estimated at 2.8 trillion KRW due to sluggish mobile product shipments caused by weak smartphone demand and increased one-time costs from Solidigm, a subsidiary incorporated after acquiring Intel's NAND business unit.

From the second quarter of this year, benefits from rising NAND prices are expected. Starting in Q2, aided by the NAND price increase following the Kioxia factory incident, sales and operating profit are projected to rise by 12.1% and 3.8% respectively compared to the previous quarter, reaching 12.7 trillion KRW and 2.9 trillion KRW. Additionally, the share of DDR5 in PC DRAM sales in Q1 is expected to be around 10%, and the share of DDR5 in total DRAM sales is estimated to be about 2%.

The initial price premium of DDR5 over DDR4 is more than 40%, and the price premium for server DDR5 in the second half of the year is also expected to be formed at over 40%. Considering the shipment trends of new server CPUs from Intel and AMD, SK Hynix's DDR5 share in server DRAM is estimated to be over 10% in Q3 and over 20% in Q4.

The weak smartphone demand in China and Eastern Europe in the first half of the year is not expected to continue into the second half. Taking into account the increased DRAM demand for Apple's iPhone 14 standard models, DDR5 adoption in the iPhone 14 Pro models, and demand for server Green DIMMs (Dual In-line Memory Modules), performance is expected to turn around in the second half of the year.

Moreover, SK Hynix developed a 24Gb DDR5 product, the largest capacity for a single chip, using EUV process technology at the end of last year. When making DIMMs with this chip, power efficiency can be improved, and performance can be enhanced to the next level. Accordingly, demand for DIMM replacements is expected to increase.

Researcher Geunchang Noh of Hyundai Motor Securities stated, "Special gases such as neon have inventory levels of 3 to 6 months, and since purchasing countries are diversified, the impact of (Russia's invasion of Ukraine) on performance is expected to be minimal."