SK hynix(000660) recorded operating profit that slightly missed market expectations in the second quarter, but Korea Investment & Securities Co. said the impact came from the deferral of high value-added products to the second half. It projected that high-bandwidth memory (HBM) and rising DRAM prices will instead drive strong results. It kept a "Buy" recommendation and raised the target price by 23.7% to 4.7 million won from 3.8 million won.
Chae Min-suk of Korea Investment & Securities Co. said, "Second-quarter operating profit missed the consensus, but that was due to a deferral of shipment timing, not a slowdown in demand," adding, "It will instead act as a factor improving results in the second half."
SK hynix posted second-quarter revenue of 7.93 trillion won and operating profit of 6.05 trillion won. Revenue rose 51% from the previous quarter and 257% from a year earlier, while operating profit increased 61% from the previous quarter and 557% from a year earlier. However, operating profit fell about 6.4% short of the market consensus of 6.47 trillion won.
Even so, the operating margin reached 76%, a record high on a quarterly basis. Korea Investment & Securities Co. estimated the operating margins of DRAM and NAND at 78% and 67%, respectively.
The background behind undershooting market expectations was that the second-quarter rise in the average selling price (ASP) of DRAM was lower than expected. But that was due to some customer shipment schedules being deferred to the second half, and does not mean demand is slowing, it said.
Chae said, "As shipments of high value-added products were deferred to the second half, the second-quarter blended ASP came in lower than expected, but in the third quarter the DRAM price increase will reach 20% from the previous quarter," adding, "It is expected to significantly exceed the previous estimate of 10%."
Chae added, "In 2026, DRAM bit growth will also surpass the previous estimate of 20% to reach the mid-20% range," explaining, "Expansion of shipments of SoCAMM2 based on 1c NANO is the main reason."
Accordingly, Korea Investment & Securities Co. raised its annual operating profit forecasts for SK hynix to 270 trillion won in 2026 and 418 trillion won in 2027, up 10% and 11% from the previous estimates, respectively.
From the second half, profitability is also expected to improve as mass-production shipments of HBM4 get into full swing. Based on long-term agreements (LTA), memory prices will remain high, and the effect of higher HBM prices will be added, it said.
As for the recent stock correction, it said it was only the result of the market's concerns about the persistence of AI investment, not a change in fundamentals.
Chae said, "Even though memory prices have risen to nearly four times last year's level, hyperscalers are continuing to invest in AI infrastructure," adding, "As production volumes are shipped immediately, both suppliers and customers are unable to secure sufficient inventory, so supply shortages will deepen toward the second half of 2026 and into 2027."
Chae added, "Even if capital expenditures (CapEx) increase, the pace of supply growth is structurally constrained by a production shift centered on HBM and leading-edge processes," adding, "It is time to focus on the direction of corporate value and earnings rather than short-term stock fluctuations."