[Click eStock] "'D-RAM Demand Polarization Deepens' SK Hynix, Target Price Down"

On the 13th, KB Securities downgraded the target price of SK Hynix to 240,000 KRW, stating that "the polarization of DRAM demand will become more pronounced in the second half of this year," while maintaining a buy rating.

On the same day, Dongwon Kim, a researcher at KB Securities, explained, "As of the third quarter this year, the inventory of memory modules at set manufacturers has increased due to sluggish sales of B2C (business-to-consumer) products such as smartphones and PCs."

He added, "The memory module inventory of B2C product companies is estimated to be an average of 14 weeks, so set manufacturers are expected to adopt a conservative component purchasing strategy until the end of the year," and said, "The rise in memory prices in the second half is falling short of initial expectations, and the continued strength of the Korean won will have an unfavorable impact on earnings improvement."

Operating profits for this year and next year have been revised downward by 6.1% and 5.3%, respectively, to 22.9 trillion KRW and 35.2 trillion KRW compared to previous estimates. He analyzed, "Operating profit in the third quarter is expected to reach 6.7 trillion KRW, marking the highest performance in six years since the third quarter of 2018," but also noted, "It is expected to slightly fall short of the market consensus operating profit of 7.07 trillion KRW."

The polarization of DRAM demand is expected to become more distinct in the second half of this year. Researcher Kim stated, "Demand for AI and server memory such as High Bandwidth Memory (HBM) and Double Data Rate (DDR)5 is still solid, so supply will remain tight in the second half," but he also predicted, "The sluggish demand in B2C, which accounts for 40% of DRAM demand, is unlikely to recover in the second half."

He added, "The sales ratio of HBM within DRAM is estimated to be 26% this year and 36% next year, so the impact of performance decline due to weak smartphone and PC demand compared to competitors is expected to be limited," and further explained, "Next year, DRAM prices are expected to gradually rise quarterly due to the expanded shipment ratio of HBM3E and supply constraints of general-purpose products, but the extent of price increases could expand depending on the strength of B2C demand recovery next year, which will act as a performance variable."