Hyundai Motor Securities said on the 3rd that although second-quarter results for SK hynix(000660) fell somewhat short of expectations, earnings are expected to improve sharply from the third quarter on the back of expanded sales of High Bandwidth Memory (HBM)4. It maintained a "buy (BUY)" recommendation and a target price of 3.3 million won.
Earlier, SK hynix's second-quarter revenue and operating profit came in at 6.05 trillion won, slightly missing market expectations.
Noh Geun-chang, an analyst at Hyundai Motor Securities, said, "DRAM shipment (bit growth) did not meet market expectations," but noted, "From the third quarter, as HBM4 is fully reflected in revenue, earnings will improve steeply."
Noh projected third-quarter revenue and operating profit would reach 10.36 trillion won and 7.9 trillion won, respectively. The view is that, helped by expanded HBM4 sales, the average selling price (ASP) of DRAM will rise about 20% from the previous quarter.
He also assessed concerns about long-term agreements (LTA) as limited. Noh said, "LTA contracts are estimated to have a high share of five-year terms, and many contracts have even secured advance payments, so the likelihood of customers canceling contracts is very low."
He also projected the AI investment cycle will continue for the time being. He said, "Capital expenditures (CAPEX) by North American cloud service providers (CSP) are highly likely to expand through 2028 despite a deterioration in free cash flow (FCF) and higher funding rates," adding, "Even if some reduce investment, it will be sufficiently offset by increased investment by other corporations."
In particular, he cited the push by OpenAI and Anthropic to build their own artificial intelligence data centers (AIDC) as another factor boosting memory demand. Noh explained, "As both companies are preparing initial public offerings (IPO), a portion of the funds raised is highly likely to flow into AI data center investment."
He also judged that the impact of the rise of Chinese memory maker CXMT would be limited. He added, "Due to U.S. restrictions on semiconductor equipment, it is not easy for CXMT to secure advanced tools, and the likelihood that U.S. corporations will adopt Chinese-made memory is not high," noting, "U.S. semiconductor sanctions on China could also be further tightened."