[Click eStock] SK Hynix, Stock Price 'Attractive' but Earnings 'Concerning'

[Asia Economy Reporter Junho Hwang] KB Securities lowered SK Hynix's target stock price to 125,000 KRW on the 28th.

KB Securities adjusted the target price downward, anticipating a delay in the improvement of memory semiconductor supply and demand in the second half of this year due to inflation and disruptions in the parts supply chain. Following the downward revision of earnings estimates, the return on equity is expected to decrease from 12.9% to 11.9% over the next three years.

Despite the downward outlook on the stock price, KB Securities maintained a "Buy" investment rating. KB Securities stated, “Despite the expected decline in memory prices in the second half of this year, the current stock price (valuation) has fallen excessively compared to earnings, and next year’s increase in memory supply is expected to be limited, reducing the likelihood of a hard landing in the memory industry.”

SK Hynix's earnings for the second quarter of this year are estimated to record sales of 14.3 trillion KRW and operating profit of 3.8 trillion KRW. Quarterly operating profit is expected to show an increasing trend through the third quarter of this year.

Meanwhile, the average selling price (ASP) of DRAM is forecasted to decline from -2% in the second quarter to -5% in the next quarter, indicating a larger drop. NAND ASP is expected to turn from +5% in the second quarter to -4% in the third quarter.

Dongwon Kim, a researcher at KB Securities, analyzed, "Due to the weakening demand visibility caused by increasing external economic uncertainties starting from the second quarter of this year, the currently robust order growth trend in servers and iPhone demand is unlikely to offset the decline in smartphone and PC demand in the second half of this year."