SK Hynix
The author is an analyst for NH Investment & Securities. He can be reached at hwdoh@nhqv.com -- Ed.
Demand is looking strong for high-performance memory such as DDR5 and HBM, products for which SK Hynix has ？secured a competitive edge. Industry conditions are anticipated to improve in earnest from 3Q23.
Demand and DDR5 and HBM looking solid
We maintain a Buy rating and a TP of W150,000 on SK Hynix. On Jul 26, SK Hynix released its 2Q23 results, announcing consolidated sales of W7.3tn (+44% q-q), operating losses of W2.88tn (TTL q-q), and net losses of W2.99tn (TTL q-q). Operating income proved in line with both our estimate and consensus.
For 2Q23, we estimate: DRAM shipments +34%, ASP +9% q-q, NAND shipments +50%, and ASP -10% q-q. Demand for premium products such as DDR5 and HBM increased significantly. With SK Hynix boasting a competitive edge for such products, it outshined competitors.
Industry conditions to improve in earnest from 3Q23
With AI investment continuing to ascend, demand for high-capacity, high-performance HBM has been rising sharply. Of note, AI servers use 2~8x more memory than normal servers. Also, it is common to mount HBM, which is more than 6x more expensive than general DRAM. For its newest product, HBM3, SK Hynix is the sole supplier.
Industry conditions are primed to improve in earnest from 3Q23. With likely ASP hikes for DRAM (+5% q-q) and NAND (+5% q-q) to notably reduce losses, we see 3Q23 sales of W7.61tn (+4% q-q) and operating losses of W1.32tn (RR q-q). In 4Q23, operating income should turn to black at W0.01tn. We foresee 2024 OP of W20.05tn (TTP y-y).