Korea Investment & Securities on the 14th reaffirmed its buy and overweight recommendation on memory semiconductors despite forecasting SK Hynix's Q2 operating profit at 60.4 trillion won, 8% below the market consensus of 65 trillion won. Analyst Chae Min-sook emphasized that structural supply constraints from high-bandwidth memory (HBM) expansion and long-term supply agreements (LTA) will sustain high profitability levels in the memory industry. The brokerage maintains target prices of 3.8 million won for SK Hynix and 590,000 won for Samsung Electronics, following SK Hynix's 15.37% stock decline the previous day attributed partly to the lowered earnings forecast.
Korea Investment & Securities Maintains Buy Rating on Memory Semiconductors
Chae Min-sook, a researcher at Korea Investment & Securities, stated on the 14th, "We maintain our buy and overweight opinion on memory semiconductors." The brokerage presents target prices of 3.8 million won for SK Hynix and 590,000 won for Samsung Electronics. Chae emphasized, "Recent stock price volatility reflects macro uncertainty and concerns about the sustainability of artificial intelligence (AI) infrastructure investment. However, structural supply constraints due to HBM expansion and long-term contract structures through LTA will serve as a foundation for maintaining high profit levels in the memory industry for an extended period."
SK Hynix Q2 Operating Profit Forecast 8% Below Consensus
Korea Investment & Securities forecasted SK Hynix's Q2 operating profit at 60.4 trillion won, 8% below the consensus of 65 trillion won. The brokerage also lowered its operating profit estimates for this year and next year by 9% and 11%, respectively, from previous projections. This forecast emerged as one of the factors stimulating selling pressure on SK Hynix, with the stock closing down 15.37% the previous day.
Analyst Cites Structural Supply Constraints as Long-Term Profitability Driver
Chae stated, "There has been no change in the core variables of the industry conditions: AI infrastructure investment expansion and limited supply. Now is the time to focus on mid- to long-term fundamentals rather than short-term stock price volatility." The analyst highlighted that the structural supply constraints from HBM expansion and long-term supply agreements provide a foundation for sustaining high profit levels in the memory industry over an extended period.
DRAM Price Increases Driven by Supply Factors Not Demand Slowdown
Chae explained, "We forecasted that quarterly price increases would gradually decrease starting in Q3, but this is not due to an industry slowdown. DRAM prices have risen fivefold in one year, and suppliers' gross profit margins already exceed 90% based on commodity DRAM." The analyst clarified that the moderation in price increases reflects profitability levels already achieved rather than weakening demand conditions.
FAQ
What target prices does Korea Investment & Securities maintain for SK Hynix and Samsung Electronics?
Korea Investment & Securities maintains target prices of 3.8 million won for SK Hynix and 590,000 won for Samsung Electronics as of the 14th.
Why did SK Hynix stock decline the previous day?
SK Hynix stock closed down 15.37% the previous day, with Korea Investment & Securities' forecast of Q2 operating profit at 60.4 trillion won (8% below the consensus of 65 trillion won) cited as one contributing factor to the selling pressure.
What factors does Korea Investment & Securities cite for long-term memory semiconductor profitability?
Analyst Chae Min-sook cited structural supply constraints from high-bandwidth memory (HBM) expansion and long-term supply agreements (LTA) as foundations for maintaining high profit levels in the memory industry for an extended period.
