SK Hynix 2Q Operating Profit Seen at $47.9 Billion as LTAs Ease Volatility, SangSangin Says

SangSangin Securities said on July 3 that SK Hynix's second-quarter results likely slightly exceeded market expectations and that earnings should improve further in the second half. The brokerage raised its target price to 380,000 won ($275) from 140,000 won and maintained its buy rating.

Analyst Jung Min-kyu said the target price was calculated by applying a price-to-book ratio of 5.3 times to the company's projected book value per share over the next 12 months. SangSangin used a multiple above the historical average because it expects long-term supply agreements, or LTAs, to increase as demand for artificial intelligence semiconductors grows, reducing earnings volatility from past levels. A planned American depositary receipt, or ADR, listing should also improve access for overseas investors, he added.

Jung projected second-quarter revenue of 86.5 trillion won ($62.6 billion) and operating profit of 66.2 trillion won ($47.9 billion), up 289% and 618% from a year earlier, respectively. He estimated DRAM revenue at 69.1 trillion won ($50.0 billion) and operating profit at 54.7 trillion won ($39.6 billion), saying strong memory prices would drive earnings.

He said NAND flash earnings would improve sharply as demand for enterprise solid-state drives, or eSSDs, used in AI servers rises quickly. Major memory makers are also refraining from aggressive capacity expansion and are carefully controlling supply, supporting a steady increase in average selling prices. On that basis, he forecast NAND revenue of 16.8 trillion won ($12.2 billion) and operating profit of 11.5 trillion won ($8.3 billion).

Jung said wider shipments of high-bandwidth memory, or HBM, and further increases in contract prices for commodity DRAM and NAND would drive earnings upgrades in the second half. If next year's HBM prices are set above current expectations, earnings forecasts could be revised higher again, he said. He added that key variables to watch are how much overseas capital flows in after the ADR listing and how quickly the company's valuation discount to global peers narrows.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com