Meritz Securities said on the 11th that it expects simultaneous earnings improvement at HANA Micron's headquarters and its Vietnam subsidiary. It raised the target price to 21,000 won from 15,000 won and maintained a buy rating.
HANA Micron's operating profit is expected to be 37.6 billion won in the third quarter and 57.2 billion won in the fourth quarter. Operating profit is forecast to rise steeply by 24% and 52% quarter over quarter, respectively.
Kim Dong-gwan, a researcher at Meritz Securities, said, "The improvement in earnings at the Vietnam subsidiary that handles SK hynix's memory back-end processing is the key to growth."
Sales at the Vietnam subsidiary are projected at 208.6 billion won in the third quarter, up 28% from the previous quarter. In the fourth quarter, as the temporary pass-through of higher outsourcing prices for back-end processes is reflected, revenue is expected to edge up to 220.7 billion won, but the operating margin is forecast to improve sharply from 4% in the third quarter to 11% in the fourth quarter.
At headquarters, expectations are growing for tandem growth as sales of raw and subsidiary materials expand in line with the Vietnam subsidiary's growth. On a standalone basis, HANA Micron's sales are expected to grow 17% in the third quarter and 19% in the fourth quarter from the previous quarter. On top of that, starting next year, as client companies expand investment in AI servers, demand for server DRAM is also expected to rise at the same time.
Kim said, "HANA Micron's valuation has a high correlation with legacy memory market conditions," adding, "Since the company runs a product mix centered on server DRAM, we can also expect further upside in valuation and another round of upward revisions to earnings expectations."