Samsung Securities on the 21st said SK hynix's current cycle could see a longer boom than in the past and projected an operating profit of 40 trillion won for the first quarter of this year. It kept its Buy rating and raised the target price to 1.8 million won. SK hynix's previous close was 1,166,000 won.
Samsung Securities said the DRAM industry is shifting from a price-centered, cyclical industry to a quality-centered infrastructure business. It expected the blended average selling price (blended ASP) to gradually slow after the third quarter but said this is not a peak-out signal for the industry; rather, it is a phase that strengthens market confidence in the durability of earnings.
Researcher Lee Jong-uk at Samsung Securities said, "Of course, it would be excessive to interpret this as meaning the DRAM industry is no longer cyclical," but added, "What differentiates this cycle is that, unlike in the past, conditions have formed that could structurally extend the duration of the boom."
It projected first-quarter results of 53.6 trillion won in revenue, 40.2 trillion won in operating profit and a 74.9% operating margin.
Lee said, "We expect the company to post its strongest results since its founding," adding, "The core driver of the earnings surprise is that the intensity of product price increases, centered on server DRAM, was higher than initially expected." Samsung Securities estimated that in the first quarter SK hynix raised DRAM prices by 95%, lifting blended ASP by 60%.
The report also noted that in this cycle, demand price elasticity has structurally decreased. Unlike mobile and PC customers in the past, for server customers DRAM is treated not as a simple material cost but as a long-term investment asset (Capex).
Lee said, "In the end, DRAM pricing is not a top priority when cloud service providers (CSPs) decide whether to invest in artificial intelligence (AI). AI infrastructure investment is a strategic choice, with performance gains and market preemption as the keys."
In such an environment, the analysis said demand is unlikely to show price resistance even if DRAM prices are high. It added that more recently even NAND is being drawn into this trend.
It also said concerns about HBM4, the sixth-generation high bandwidth memory (HBM), are excessive.
Lee said, "There is ample possibility that some technical issues such as heat generation in early products, Production yield and power characteristics exist, which could affect certification with customers and mass production timelines," adding, "However, we judge that through collaboration with major customers, a certain level of specification adjustments and optimization is likely to be achieved within the first half."
Samsung Securities raised its estimate for SK hynix's annual operating profit to 205 trillion won. Reflecting the trend of strengthening earnings durability, it projected profit would rise further to 232 trillion won next year.