"2 Million Won for SK hynix? We Say 'No'"... Why BNK Downgraded Its View on SK hynix

[The Financial News] While securities firms have been issuing a series of upbeat forecasts for SK hynix, maintaining a "buy" rating and predicting that the stock could climb above 2 million won, one report has raised concerns about a slowdown in the second half of the year.

A report from mid-sized brokerage BNK Securities has drawn attention after it lowered its rating, citing the profitability of HBM4.

On the 27th, BNK Securities downgraded SK hynix from "buy" to "hold." It also kept its target price at 1.3 million won. The firm said the adjustment reflected valuation pressure after the recent sharp rally and the possibility of weaker earnings in the second half.

Lee Min-hee, a researcher at BNK Securities, forecast that second-quarter operating profit would rise further to 60.25 trillion won. She said DRAM and NAND flash memory average selling prices would increase by 30% and 40%, respectively, from the previous quarter. However, she added that growth could slow in the second half as the AI inference cycle that began last year enters its later stage and the share of lower-margin HBM4 sales expands.

She also explained that the trend of hyperscalers raising AI capital spending has slowed since March, and that the narrowing gap between spot prices and fixed contract prices is likely to reduce the pace of ASP gains. "Supply and demand will remain tight because of large existing server orders, but stock price momentum could weaken," she said.

The report also pointed to SK hynix's failure to deliver results at the level of an "Earnings Surprise" as another reason for the downgrade.

Lee said, "SK hynix's first-quarter results this year fell short of elevated expectations," adding that it beat the consensus estimate by just 1% in revenue and 3% in operating profit.

On the 23rd, SK hynix announced that its operating profit for the first quarter on a consolidated basis came to 37.6103 trillion won, up 405.5% from a year earlier. Revenue rose 198.1% to 52.5763 trillion won. Although both figures were quarterly records, some analysts said the results were not as surprising as expected.

Lee noted, "Compared with the market mood after recent earnings releases from Micron Technology, Inc. and Samsung Electronics Co., Ltd., the results did not meet the bar for more than 40 trillion won in operating profit." She added that NAND flash memory bit growth fell 11% from the previous quarter, leaving revenue below expectations and margins weaker than forecast.
She also said that despite the sharp earnings growth, SK hynix is now likely to shift toward a low price-earnings ratio (PER) stock as the cycle enters its later stage and second-half momentum fades.

y27k@fnnews.com Seo Yoon-kyung Reporter