SK Hynix Price Targets Climb After Samsung Earnings Beat, KB Sets 1.9 Million Won

Memory-chip prices are rising faster than brokerages expected

SK Hynix profit forecasts raised 12% in three days after Samsung earnings

KB Securities sets 1.9 million won target price for SK Hynix

Brokerages are steadily raising their target prices for SK Hynix after Samsung Electronics reported first-quarter results that far exceeded market expectations, lifting sentiment toward the memory-chip maker.

According to the Korea Exchange on April 11, SK Hynix rose 2.91% to close at 1.027 million won on April 10. The stock reclaimed the 1 million won level on April 8, the day after Samsung announced preliminary earnings, helped by momentum from a ceasefire in the Middle East conflict, and has since fluctuated as it tries to hold that mark.

Samsung's stronger-than-expected first-quarter earnings have also fueled expectations for SK Hynix's results. The earnings beat was driven by rising memory-chip prices, and those market conditions have a bigger impact on SK Hynix than on Samsung.

Samsung posted first-quarter operating profit of 5.72 trillion won. That far exceeded the 3.8 trillion won consensus estimate, the average of brokerage forecasts compiled just before the release. It also topped Korea Investment & Securities' 5 trillion won estimate, which had been the highest forecast immediately before the announcement.

The result reflected a sharper-than-expected increase in memory-chip prices. Chae Min-sook, an analyst at Korea Investment & Securities, wrote that higher average selling prices for commodity DRAM and NAND flash drove the earnings beat. She added that long-term supply contracts should keep ASPs elevated over the medium to long term, easing concerns that earnings have already peaked.

With Samsung's results topping even the latest forecasts, brokerages are lifting their estimates for SK Hynix. The consensus estimate for SK Hynix's first-quarter operating profit now stands at 3.49292 trillion won, according to financial data provider FnGuide. That figure has been revised up 12.21% this month.

Most forecasts issued since Samsung's preliminary earnings release on April 6 have come in at around 4 trillion won. Yuanta Securities published the highest estimate at 4.0362 trillion won, while the lowest, from Korea Investment & Securities, was still 3.8493 trillion won, 10.2% above the consensus.

Target prices are moving higher as earnings estimates rise. The consensus target price for SK Hynix has climbed to 1.432 million won, up 4.62% over the three trading days since April 6. Five of the six reports published on the company during that period raised their target prices.

KB Securities was the most bullish, setting a 1.9 million won target price. The firm raised its estimates for this year's and next year's operating profit to 25.1 trillion won and 35.8 trillion won, up 42% and 55%, respectively, from earlier forecasts. Kim Dong-won, an analyst at KB Securities, wrote that SK Hynix's operating profit this year would exceed Microsoft's roughly 24.5 trillion won and Alphabet's about 24 trillion won. He said the chipmaker's position among the world's top five companies by operating profit is coming into view.

Han Kyung-woo, Hankyung.com reporter case@hankyung.com