Korea Investors Service Upgrades SK hynix Credit Rating from AA to AA+... First Upgrade in 8 Years

Assessment of Improved Business Performance and Enhanced Financial Stability

Korea Investors Service announced on January 30 that it will upgrade SK hynix's unsecured bond credit rating from AA (Positive) to AA+ (Stable). This marks the highest rating ever assigned to SK hynix by Korea Investors Service, and it is the first upgrade in eight years since 2018.

Korea Investors Service explained that the credit rating adjustment for SK hynix was based on several factors: a significant improvement in business performance driven by robust AI memory demand and leadership in HBM technology; a substantial enhancement in financial stability supported by improved cash generation; and the expectation that SK hynix will continue to improve its financial structure while maintaining its leading position in the HBM market.

Yonhap News Agency

First, Korea Investors Service assessed that SK hynix achieved a sharp improvement in performance in 2024, following a record-breaking business performance last year. In the previous year, SK hynix posted sales of 97.1 trillion won and an operating profit of 47.2 trillion won. Korea Investors Service stated, "With strong AI server investment demand led by global hyperscalers continuing, SK hynix is enjoying high margins by securing a dominant position in the rapidly expanding HBM market, thanks to its industry-leading technological competitiveness." The agency also noted, "Additionally, improved supply and demand for general-purpose DRAM and NAND is further supporting the company's performance growth."

Regarding the enhancement of financial stability, Korea Investors Service commented, "Despite increased capital expenditures for facility expansion to meet HBM customer demand, cash flow has improved significantly." The agency added, "Key financial stability indicators are also improving rapidly due to capital expansion resulting from substantial net profit generation."

Korea Investors Service projected that SK hynix will continue to lead the HBM market and maintain its momentum in improving its financial structure this year. The agency noted, "With annual supply volume and prices for HBM confirmed through a yearly supply agreement with Nvidia, SK hynix is expected to maintain a leading supplier position in HBM4 by securing more than half of customer demand, thanks to its superior ability to respond quickly to customer needs and meet technical specifications." Korea Investors Service further analyzed, "Although annual capital expenditures (CAPEX) are expected to rise to the mid-30 trillion won range this year, the strong trend of cash flow improvement is likely to continue, considering the pace of profit growth despite high capital requirements."

Previously, other major domestic credit rating agencies also upgraded SK hynix's credit outlook. NICE Investors Service raised the outlook for SK hynix's unsecured bond rating from 'Stable' to 'Positive' in October last year, citing strong business stability due to high market dominance and technological competitiveness in an oligopolistic market. Korea Ratings also upgraded the outlook for SK hynix's unsecured bond rating from 'Stable' to 'Positive' in October last year.