Key Morningstar Metrics for SK Hynix
- : USD 152Fair Value Estimate
- : ★★★Morningstar Rating
- : NoneMorningstar Economic Moat Rating
- : Very HighMorningstar Uncertainty Rating
What We Thought of SK Hynix’s Earnings
SK Hynix SKHY‘s June-quarter revenue and operating margin of KRW 79 trillion and 76% grew 51% and 479 basis points, respectively, sequentially. Shares closed 10% lower after the earnings call.
Why it matters: Revenue was just shy of our expectations as sequential NAND price hikes of 56% missed our forecast of 70%, likely due to pushback from device customers hitting affordability limits. We foresee conventional memory price gains slowing earlier than expected, limiting peak pricing longer-term.
- Memory now accounts for over 30%-40% of PC and smartphone component costs, double the historical average. We think memory-driven device price hikes are severely straining consumer purchasing willingness, leading to growing resistance by consumer electronics customers in pricing negotiations.
- Still, operating margins stayed in line with our forecasts, driven by lower process migration costs for NAND and DRAM. In the meantime, we expect HBM4 shipments, which we estimate to be 50%-60% more expensive than HBM3E to ramp up, continuing to support near-term profitability.
The bottom line: We lower our fair value estimates for SK Hynix by 8% to KRW 2,200,000 per share, and by 5% to USD 152 per ADR, on softer peak memory prices over the cycle. While our view on cyclicality is unchanged, we see the selloff as overdone as valuations diverge from US peers. Shares look cheap after the drawdown.
- We lower our 2026-28 revenue forecasts by 5%-10% on a lower peak memory pricing forecast through the cycle. We keep our operating margins, given HBM4 yield improvements ahead of our estimates, underscoring SK Hynix’s ability to ramp new nodes. Our midcycle estimates are broadly unchanged.
- SK Hynix trades at a 2027 price/book ratio of 1.4 times, a steep discount versus Micron’s 2.1 times, despite broadly similar dynamics. While we think the selloff was partly due to memory prices being below market expectations, we believe it is amplified by continued unwinding of margin on leveraged share buying.
