SK Hynix Q4 Operating Profit to Exceed 16 Trillion Won on HBM Demand Surge

Kiwoom Securities forecast that SK hynix (000660.KS) will report surprise earnings for the fourth quarter of this year, gaining an edge in the memory price upcycle driven by high-bandwidth memory (HBM). The brokerage also projected that SK hynix will generate nearly 18 trillion won in operating profit in the first quarter of next year amid rising prices and increasing demand.

Kiwoom Securities released an analysis report on SK hynix on Wednesday, maintaining its target price at 730,000 won. "The HBM-driven memory price upcycle is proving stronger than expected," analyst Park Yu-ak said. "SK hynix is expected to record operating profit of 16.2 trillion won in the fourth quarter, exceeding market consensus of 14.6 trillion won based on FnGuide estimates."

By business segment, the brokerage expects DRAM to generate 15.3 trillion won and NAND to contribute 900 billion won in operating profit, representing quarter-on-quarter increases of 39% and 170%, respectively.

Regarding the outlook for the first quarter of next year, Park said, "Revenue will reach 31.5 trillion won and operating profit will hit 17.9 trillion won, again exceeding market expectations of 30.4 trillion won in revenue and 16.3 trillion won in operating profit." He added, "Commodity DRAM prices are expected to rise 22% quarter-on-quarter while NAND prices increase 5%, further improving profitability."

The recent sharp rise in NAND prices was also cited as a positive factor. "NAND transaction prices are increasingly likely to exceed our forecasts," Park said. "While there are concerns about cost increases from the new M15X facility coming online, product price increases will more than offset this." Based on this analysis, he estimated that first-quarter operating profit by segment will reach 17 trillion won for DRAM and 1 trillion won for NAND, each increasing 11% from the previous quarter.

Key factors behind the improved market conditions include lower commodity DRAM distribution inventory, DDR5 supply adjustments, and recovering server DRAM demand. "The intensity of the early-stage price upcycle is exceeding expectations, and this momentum is spreading to NAND as well," Park explained.

The possibility of further memory price increases was also raised. "Major set makers are absorbing higher memory costs through product price increases, raising the potential for additional memory price gains," Park said. He added, "While price hikes could lead to reduced set demand in the short term, upward revisions to memory price forecasts and improved earnings expectations will provide upward momentum for SK hynix shares for the time being."