"Nothing Has Changed Except Sentiment" ... SK hynix's Sharp Drop Seen as a "Chance to Increase Exposure" [Stock Spotlight]

[Financial News] After SK hynix's sharp decline the previous day, KB Securities said the stock is instead a chance to "increase exposure." The firm said the outlook for the industry and earnings is improving further as memory demand rises with the spread of artificial intelligence (AI), while supply constraints persist.
Kim Dong-won, Head of Research at KB Securities, maintained his "buy" rating on SK hynix and his target price of 3.8 million won in a report released on the 24th.
Kim said supply shortages are deepening, with customers meeting only about 50% of their memory demand. He added that supply constraints will become even more pronounced in 2027. Even if new plants are expanded, production capacity will remain focused on high-bandwidth memory (HBM), limiting the increase in general-purpose memory supply. As a result, he said HBM prices in 2027 could rise by more than 100% from a year earlier.
He also said second-quarter earnings are likely to exceed market expectations. KB Securities estimated that SK hynix's operating profit for the second quarter will reach 6.9 trillion won, nearly eight times higher than a year earlier. That would be 6.6% above the market consensus of 6.47 trillion won. Revenue for the same period is projected at 8.94 trillion won.
Kim said D-RAM and NAND prices are expected to rise by more than 50% in the second quarter, while operating margins are likely to reach 81% for DRAM and 66% for NAND. He added that from the second half of this year through 2027, supply is effectively fixed, while demand for AI memory will keep rising, prolonging the imbalance between supply and demand.
He also attributed the previous day's 12.47% plunge in SK hynix shares to weakening investor sentiment caused by macroeconomic factors, including the possibility of U.S. interest rate hikes and the company's failure to be included in the MSCI Developed Markets Index. However, he said positive factors are expanding on both the earnings and industry fronts.
In particular, he said SK hynix is likely to benefit the most from expanding supply of HBM4 and SOCAMM, as memory is expected to account for more than five times the cost share in NVIDIA's next-generation AI platform Rubin, set for release in the second half of this year, compared with Blackwell. He also said the planned U.S. ADR listing in August could help narrow the valuation gap with Micron.
Kim said, "The only thing that has changed at this point is investor sentiment." He added, "The industry outlook and earnings are actually improving, so the recent stock correction is seen as an opportunity to increase exposure."


dschoi@fnnews.com Choi Du-seon Reporter