[Edaily Marketin Reporter LEE GEON-EOM ] Korea Ratings Corporation announced on the 28th that it has maintained the credit rating of SK hynix(000660)’s unsecured bonds at AA+ and upgraded the rating outlook from “Stable” to “Positive.” The commercial paper rating was maintained at A1. The outlook for the corporate credit rating (AA+) of its largest shareholder, SKSQUARE(402340), was also raised to “Positive.”

A “Positive” outlook indicates the possibility of a credit rating upgrade in the medium term. This means SK hynix now has the potential for a further upgrade just seven months after being raised one notch to AA+ last March.

Korea Ratings judged that the improvement in financial buffers—which it had cited as a factor for a potential further upgrade at the time of the March rating upgrade—has rapidly materialized. SK hynix’s net cash surged from 10.2 trillion won at the end of 2025 to 98.7 trillion won as of the end of September this year (based on preliminary results), and its EBITDA-to-total-debt ratio stood at just 0.1x. The rating also reflected the increased predictability regarding future cash requirements and financial structure following the announcement of mid- to long-term investment plans and shareholder return policies.

The pace of earnings improvement is also steep. In the first half of this year, consolidated revenue reached 131.895 trillion won, and operating profit reached 98.1529 trillion won, resulting in an operating profit margin of 74.4%. Preliminary third-quarter revenue and operating profit were 104.6 trillion won and 83.3 trillion won, respectively, up 32% and 38% from the previous quarter. This is due to the combined effect of an increased supply share of high-value-added products—HBM3E and HBM4—and rising prices for general-purpose memory.

Han Shin Rating cited long-term supply contracts as a key factor in reducing market volatility. SK hynix has secured long-term supply contracts covering more than 50% of its total production capacity for 2027 and 2028, which include mechanisms to mitigate price volatility and performance bonds. High-Bandwidth Memory (HBM) requires a lengthy development and certification process starting from the customer’s product development stage, making it difficult to switch suppliers. Analysts predict that even during a market downturn, the trough in operating performance will be higher than in the past.

The company’s ability to handle large-scale capital expenditures was also assessed as manageable. Capital expenditures are projected to reach approximately 47 trillion won this year and about 65 trillion won next year, and the shareholder return policy has been strengthened to “50% or more of free cash flow (FCF).” However, the company explained that since it manages capital expenditures within the mid-30% range of revenue, the scale of investment can be adjusted accordingly if earnings decline. Han Shin Rating projected that net cash will continue to increase through next year, even after accounting for investments and shareholder returns.

There are still factors to monitor. SK hynix’s HBM market share fell from 58% in the first quarter of this year to 50% in the second quarter, while SamsungElectronics’ share rose from 21% to 33% over the same period. Han Shin Rating cited the potential for a slowdown in demand due to delays in monetizing AI services, the U.S. government’s demands to expand local production capacity, and the catch-up efforts of Chinese memory manufacturers as key factors to monitor.

The upward revision of SKSQUARE’s outlook stems from the change in SK hynix’s outlook. SKSQUARE, an intermediate holding company that holds a 20.5% stake in SK hynix, has its creditworthiness assessed based on the credit rating of SK hynix, which accounts for the largest share of its subsidiaries. On a standalone basis, it has no borrowings, and its debt-to-equity ratio as of the end of June was 5.1%. With SK hynix deciding to increase its cash dividend to over 30 trillion won for fiscal year 2026, an expansion in dividend income is also expected.

Kim Jeong-hoon, a senior analyst at Han Shin Rating, stated in a rating report, “Considering the structural growth in AI memory demand and the foundation of long-term supply contracts, we expect the company to maintain higher profit-generating capacity and excellent financial buffers compared to the past, even during a downturn in the industry.” He added, “Taking into account the flexibility to adjust investments and shareholder returns, we believe the financial buffers are sufficient even if we assume a sharp decline in earnings comparable to past downturns.”