[Click eStock] "SK Hynix, 3Q Earnings Start Weak"…Target Price ↓

[Asia Economy Reporter Lee Jung-yoon] IBK Investment & Securities lowered the target price of SK Hynix from 130,000 KRW to 100,000 KRW on the 30th, citing expected weak earnings in the third quarter of this year.

However, despite the anticipated weak demand for DRAM, the company maintained a buy rating, expecting that the price decline period will not last long due to supply restrictions by suppliers, which will limit further stock price drops. They also judged that the recent stock price decline already reflects a significant portion of the expected future earnings weakness.

SK Hynix's third-quarter sales this year are expected to decrease by 11.3% from the previous quarter to 12.2 trillion KRW. The DRAM segment is projected to shrink by 15% compared to the previous quarter, due to sluggish demand in the downstream industries. NAND segment sales are analyzed to decrease by 5.1%.

Operating profit for the third quarter is forecasted to drop by 47.2% from the previous quarter to 2.21 trillion KRW. With DRAM bit growth declining and prices lower than the previous quarter, the operating profit margin is expected to fall by 14 percentage points.

Kim Un-ho, a researcher at IBK Investment & Securities, explained, "Demand in the memory downstream industry is not expected to improve easily. Server demand will remain steady but is likely to fluctuate quarterly." He added, "At this point, since it is a price decline phase, there seems to be no active purchasing intention, as inventory levels already secured remain high."

He further stated, "Lowering expectations and adjusting supply is considered an appropriate alternative at this time. Considering this, the supply bit growth for this year is expected to be lower than previous forecasts, and the timing for supply-demand balance may be brought forward."