Hana Securities on Apr. 2 raised its forecast for SK hynix's first-quarter results this year and also lifted its annual operating profit outlook to 232 trillion won, up 47% from the previous estimate. It maintained a Buy recommendation and raised the target price to 1.6 million won. SK hynix's previous session closing price was 893,000 won.
Hana Securities raised its outlook for SK hynix's first-quarter results this year. It projected revenue of 53.5 trillion won, up 203% from a year earlier, and operating profit of 36.9 trillion won, up 395%.
Kim Rok-ho, an analyst at Hana Securities, said, "It was found that prices for both DRAM and NAND are higher than initially expected, so we raised our price assumptions," adding, "Led by servers, prices for mobile- and PC-bound DRAM and NAND for downstream industries are understood to be forming higher than before."
For servers, prices rose on the back of solid demand, and mobile and PC clients are believed to have front-loaded purchases because they would find it burdensome to buy memory at higher prices in the second to third quarters.
Kim said, "DRAM makers are currently conducting negotiations on memory prices for the second quarter of this year," adding, "Previously, we expected price resistance and some order reductions from business-to-consumer (B2C) clients due to cost burdens, but despite those burdens, they are understood to be accepting price increases to some extent."
In particular, the increase in mobile prices is estimated to be large. The analysis is that Samsung Electronics and Apple are seen to have devised a strategy to use the cost-burden range from higher memory prices as an opportunity to expand market share.
Hana Securities meanwhile projected SK hynix's annual operating profit this year at 231.7 trillion won, 47% higher than the previous outlook.
Kim explained, "The reason the target price increase is smaller than the upside to earnings is that we reflected the recent multiple contraction among memory chipmakers," adding, "Multiples have come down due to the recent Middle East situation and interest rate uncertainty."
She added that they are waiting for events that would be positive for the stock price going forward.
SK hynix said on the 24th that it had confidentially submitted a filing to the U.S. Securities and Exchange Commission (SEC) for an American depository receipts (ADR) listing.
Kim analyzed, "It is understood as a plan to have SK hynix's corporate value properly reappraised in the U.S. stock market, where global big tech companies are listed."
In addition, SK hynix is in talks with clients on long-term supply agreements, and unlike in the past, terms such as advance payments and penalties to strengthen the binding force of contracts are said to be under discussion.
Kim said, "Because it concerns contracts with clients, it will be difficult to disclose detailed terms publicly, but we expect binding long-term supply agreements to serve as grounds for multiple expansion in that they can reduce volatility in the memory industry."