[Click eStock] "SK Hynix Expected to Deliver Q4 Earnings Surprise... Stock Rally to Continue"

On December 8, Kiwoom Securities stated that SK Hynix is expected to post a significant earnings surprise in the fourth quarter of this year and the first quarter of next year, greatly exceeding market expectations. The firm believes that this momentum for upward earnings consensus revisions will drive the stock price higher.

Park Yuak, a researcher at Kiwoom Securities, maintained a 'Buy' rating and a target price of 7.3 million won for SK Hynix in a report released the same day.

According to Kiwoom Securities, SK Hynix's sales in the fourth quarter of this year are expected to reach 30.3 trillion won, up 24% from the previous quarter, while operating profit is projected to increase by 43% to 16.2 trillion won. The operating profit figure is well above the market consensus of 14.6 trillion won. This is attributed to upward revisions in the forecast for fixed prices of general-purpose memory products, as well as an increase in expected sales volume of HBM3e. The sales volume of HBM in the fourth quarter is projected to reach 4.1 billion gigabits, a 9% increase from the previous quarter. By business segment, operating profit for DRAM is expected to rise by 39% quarter-on-quarter to 15.3 trillion won, while NAND is forecast to surge by 170% to 900 billion won.

Operating profit for the first quarter of next year is also expected to reach 17.9 trillion won, a 10% increase from the previous quarter, and significantly above the market consensus of 16.3 trillion won. This is because the price of general-purpose DRAM is expected to rise by 22%, and the price of NAND by 5%, leading to improved profitability. The report also noted that the momentum for NAND price increases has recently strengthened, suggesting that first-quarter NAND transaction prices could significantly exceed the firm's expectations.

Researcher Park analyzed that the recovery in the memory market is occurring with greater strength than anticipated. He stated, "General-purpose DRAM is experiencing a recovery cycle centered on price increases, due to reduced distribution inventory, decreased supply of DDR5, and improved demand for server DRAM. Recently, this positive trend has been spreading to the NAND industry, so there is a growing likelihood that price and earnings forecasts for the NAND segment in the first half of next year will far exceed market expectations."

He added, "Major customers, including PC and server manufacturers, are alleviating memory cost burdens through product price increases, which further enhances the potential for additional memory price hikes."