DS Investment & Securities lowered both its third-quarter earnings estimates and its target price for SK hynix (000660), citing a weaker dollar-won exchange rate and the transition to next-generation high-bandwidth memory. The brokerage said, however, that investors should focus on additional shareholder returns, as HBM4 sales are expected to expand in earnest from the fourth quarter and memory prices should keep climbing.
DS Investment & Securities cut its target price for SK hynix to 2.64 million won on the 29th while maintaining a buy rating. The revision reflects a lower price-to-book ratio of 3.0 times, down from 3.4 times previously. The new target implies upside of 49.3% from the previous session's close of 1.768 million won.
The brokerage forecast third-quarter revenue of 89.5 trillion won and operating profit of 70.1 trillion won. Those figures represent gains of 13% and 16%, respectively, from the prior quarter, with an operating margin projected at 78%. Average selling prices for DRAM and NAND rose an estimated 15% and 12% from the previous quarter.
The stronger won weighed on third-quarter expectations. DS Investment & Securities lowered its assumed third-quarter exchange rate to 1,370 won per dollar from 1,430 won. Shifts in product mix and the timing of revenue recognition during the transition to next-generation HBM also had an effect, and the brokerage trimmed its DRAM bit growth forecast to 5% from its earlier estimate.
Still, the brokerage said profit growth from the fourth quarter onward deserves more attention than third-quarter results themselves, as HBM4's revenue contribution widens alongside continued increases in memory prices. DRAM shipment volumes that fell short of third-quarter projections are also expected to be recognized in the fourth quarter. DS Investment & Securities put fourth-quarter revenue at 111.9 trillion won and operating profit at 89.4 trillion won.
The brokerage also raised the possibility of further HBM price increases next year. Even as eight-layer products account for a larger share of output, supply is likely to remain tight as shipments of AI systems increase. Rising base-die and back-end processing costs during the shift to eight-layer products, combined with higher opportunity costs for HBM production as conventional DRAM prices climb, could strengthen manufacturers' pricing power, according to the analysis.
"The key variable for the share price is no longer third-quarter results but the improvement in the high-value product mix in the fourth quarter and the potential for upward revisions to 2027 profit estimates," said Lee Su-rim, an analyst at DS Investment & Securities. "Expectations for additional shareholder returns to be disclosed with the third-quarter results, along with a fourth-quarter earnings recovery, remain catalysts for the stock."
