[Click e-Stock] "SK hynix: Solidigm Concerns Overblown... Strong Market Fundamentals Not Reflected in Share Price"

Excessive Concerns Over HBM4 Quality and Solidigm Dilution

Expectation for Increased DRAM Sales and More Defined Shareholder Return Policy in Q3

DaeShin Securities Maintains Buy Rating and Target Price

DaeShin Securities has stated that the current share price of SK hynix does not fully reflect market conditions, and that a "scale up" strategy remains valid. The firm maintained its "Buy" investment rating and a target price of 3.2 million won.

On the 29th, Analyst Hyungkeun Ryu commented, "The current share price does not reflect the value of increasingly robust fundamentals," offering this analysis. On this day, SK hynix closed at 1,768,000 won, down 94,000 won (5.05%) from the previous trading day.

SK hynix Headquarters in Icheon, Gyeonggi Province. Photo by Jinhyung Kang

Recently, there have been some concerns in the market regarding SK hynix, including the quality issue with fourth-generation high bandwidth memory (HBM4) for its clients, as well as caution stemming from the planned initial public offering (IPO) of Solidigm and overseas plant investments.

In response, Analyst Ryu evaluated, "These concerns are unlikely to undermine the fundamentals." Regarding the quality issue, he emphasized, "Shipments of HBM4 are expected to begin in earnest starting from the third quarter of this year. HBM4's share is projected to account for 40% of total sales in the third quarter and is expected to rise to over 50% for the year as a whole next year." He also noted that, "Some issues may have occurred during the post-processing stage, but these are unlikely to constitute unmanageable risks, and it is premature to discuss compensation due to defects."

He also focused on the positive aspects of overseas plant investments and the Solidigm IPO. Solidigm is a subsidiary of "AI Company," an investment arm established by SK hynix in the United States earlier this year. Concerns about governance structure and earnings dilution have been raised in this context.

Analyst Ryu assessed, "Even if overseas investments do materialize, it is highly likely that actual production contribution will only occur after 2028," adding, "It is important to consider the state of construction in the US and the detailed stages of plant establishment."

He also pointed out, "The decision to invest overseas should also be viewed as a move that can reduce tariff risks," and stated, "Removal of uncertainties has historically marked good investment points for semiconductor stocks during mid-upcycle phases, and this time should be no different."

SK hynix's sales this year are estimated to reach 345.929 trillion won, up 256.1% year-on-year, with operating profit expected to climb 472.6% year-on-year to 270.312 trillion won. The price-to-earnings ratio (PER) stands at approximately 7.3 times.

Analyst Ryu further added, "Attention should be given to the prospect of further expansion in the memory semiconductor cycle, in light of a greater-than-expected rise in short-term prices due to heightened purchasing competition, as well as increased DRAM sales volume expected for the fourth quarter." He also stated, "It will be important to focus on the direction of shareholder return policies, which will be further detailed during the third quarter earnings announcement."

This content was produced with the assistance of AI translation services.