SK Hynix's Technological Edge Drives Stable Earnings

Despite market jitters over a rival's entry into the HBM market and excessive investment in AI, SK Hynix's robust technological competitiveness continues to drive stable earnings, particularly from high-end memory products like DDR5 and HBM. The company's performance is expected to improve further in the second half of 2024 with a greater focus on eSSD and HBM3E business.

Time to Load Up on Shares

Reiterating a Buy rating, we have adjusted our target price (TP) for SK Hynix from W300,000 to W280,000 due to market concerns. However, SK Hynix has nearly completed agreements to ship HBM through 2025, and memory supply remains tight. With conservative shipment plans and improving earnings from HBM3E and eSSDs, we believe the recent share price retreat is excessive and advise investors to load up on the shares.

Fundamentals Remain Strong

SK Hynix reported strong second-quarter 2024 results, with sales of W16.4tn (+32.1% q-q, +124.8% y-y) and operating profit (OP) of W5.5tn (+89.5% q-q, TTP y-y), surpassing consensus and our estimates. While NAND shipments were below expectations, strong DRAM shipments and inventory revaluation gains of about W300bn offset this. Bit growth for DRAM was +20.7% and -1.7% for NAND, with ASPs rising 14.5% for DRAM and 18.1% for NAND. We project third-quarter 2024 OP at W7.1tn, with bit growth of +2.1% for DRAM and -4.7% for NAND, and ASPs forecast to rise 10.2% for DRAM and 5.0% for NAND. The business environment should remain favorable, driven by a rebound in demand for conventional products and the expected increase in HBM3E sales.