[Edaily Reporter Shin Ha-yeon ] On the 30th, NH INVESTMENT & SECURITIES projected that memory demand would continue to rise due to the spread of artificial intelligence (AI), despite concerns regarding high-bandwidth memory (HBM) contracts and quality issues SK hynix(000660). The firm maintained its “Buy” rating and target price of 3.4 million won, noting that investors should focus on sustainable profit levels based on long-term supply agreements (LTAs) rather than short-term earnings.

Ryu Young-ho, an analyst at NH INVESTMENT & SECURITIES, stated, “As memory demand is actually increasing due to the proliferation of inference and AI agents, we expect the strategic value and cohesion of long-term supply contracts to strengthen.” He added, “Given that changes in fundamentals are limited, we maintain a positive outlook on the company.”

The firm assessed that the impact of recent controversies regarding HBM contracts and quality issues with major clients on the company’s fundamentals would be limited. It explained that as the share of custom products expands in the HBM market, long-term supply contracts with major clients could actually serve to further solidify SK hynix’s supply position starting with HBM4E.

Analyst Ryu explained, “Long-term supply contracts with major clients will ultimately serve to further solidify the company’s supply position starting with HBM4E, as the share of custom products expands,” adding, “We also assess the quality issues as problems that can be sufficiently resolved.”

He also projected that growth in the application-specific integrated circuit (ASIC) market would further boost HBM demand. This is because as the AI accelerator market expands beyond graphics processing units (GPUs) to include ASICs, both the range of HBM applications and the overall market size are likely to grow. He also cited the fact that expanding HBM production constrains general-purpose DRAM production capacity as a positive factor for the memory market.

Researcher Ryu stated, “With the recent growth in the ASIC market, HBM demand is expected to expand further, and this will act as a factor limiting the increase in generic DRAM supply, thereby having a positive impact on market conditions.”

Third-quarter earnings are forecast to fall short of market expectations. Third-quarter revenue is estimated at 93.208 trillion won, a 281.2% increase year-over-year, while operating profit is projected at 72.699 trillion won, a 538.6% increase. Compared to the previous quarter, these figures represent increases of 17.5% and 20.1%, respectively.

They are expected to fall short of the market consensus of 99.394 trillion won in revenue and 78.058 trillion won in operating profit. However, analysts note that the reason for the lowered earnings expectations is not a slowdown in the memory market or demand, but rather the impact of exchange rates.

Analyst Ryu noted, “The weaker-than-expected results are due to exchange rate effects,” pointing out that short-term earnings expectations may be somewhat lowered. He went on to emphasize, “What is more important is a sustainable level of operating profit based on the application of LTA.”

He also projected that product price trends would remain robust. For the third quarter, bit growth (B/G) for DRAM and NAND is estimated to increase by 7.1% and 2.9%, respectively, compared to the previous quarter, while average selling prices (ASPs) are projected to rise by 17.3% and 7.0%, respectively. In particular, HBM—which accounted for approximately 20% of DRAM revenue in the second quarter—is expected to have a positive impact on ASPs starting in the third quarter as HBM4 volumes increase.

Annual earnings growth is also expected to continue. NH INVESTMENT & SECURITIES projected SK hynix’s revenue for this year to reach 328.163 trillion won, a 237.8% increase year-over-year, with operating profit rising 432.3% to 251.301 trillion won. For next year, the firm forecasts revenue of 495.956 trillion won and operating profit of 388.775 trillion won, representing increases of 51.1% and 54.7%, respectively.

Additional shareholder return policies were also cited as a future driver of stock price momentum. Since the company is expected to announce additional shareholder return policies during its third-quarter earnings release, this is seen as a positive factor for the stock price, alongside the company’s fundamentals.

Analyst Ryu noted, “We expect a re-rating of memory companies driven by strong memory demand in the AI era and changes in the industry structure,” adding, “The additional shareholder return policies to be announced during the third-quarter earnings release will be a positive factor for the stock price.”