Major Bank Ratings | Daiwa: SK Hynix’s recent stock price correction is excessive, recommends buying on dips, target price lowered to 3 million KRW

Golden Ten Data, July 30 — Daiwa released a report stating that SK Hynix recorded Q2 revenue of 79.3 trillion KRW, an increase of 51% quarter-on-quarter and 257% year-on-year; operating profit reached 60.5 trillion KRW, up 61% quarter-on-quarter and 557% year-on-year, both about 7% below the company’s and market expectations, mainly due to a less favorable DRAM product mix, which caused the sales price increase to fall short of expectations. Management has a positive outlook for the second half, expecting DRAM shipments to grow approximately 10% quarter-on-quarter in Q3, with ongoing improvements in the product mix including HBM4 and 1cnm DRAM. The report noted that management has not provided specific shareholder return details due to ADR-related restrictions, but expects SK Hynix to announce a rebound in profit and additional shareholder return plans in the second half. The company has signed long-term supply agreements averaging five years with around 10 customers, with pricing structures designed to hedge market volatility and secure demand visibility. Daiwa believes SK Hynix’s recent share price correction is excessive and suggests investors take the opportunity to buy on weakness, reiterating its “Buy” rating. However, due to a downward re-rating of peers’ valuations in the memory sector, Daiwa has adjusted the target price-earnings ratio from 9.38x to 7.5x (down 20%), and the 12-month target price from 3.6 million KRW to 3 million KRW.