[Edaily Reporter kyoungeun kim ] SK hynix(000660)has posted third-quarter earnings that exceeded market expectations despite a decline in the won-dollar exchange rate, and has signaled another positive surprise for the fourth quarter. Analysts suggest that the announcement of a 100 trillion won shareholder return plan will alleviate the concerns that had been driving the recent stock price correction and help the stock recover some of its lost ground.

Nam Dae-jong, an analyst at Daol Investment & Securities, stated in a report on the 29th, “SK hynix’s third-quarter consolidated results—with revenue of 104.6 trillion won and operating profit of 83.3 trillion won—exceeded the consensus estimates (revenue of 98.2 trillion won, operating profit of 77 trillion won).” Revenue increased by 32% quarter-over-quarter, while operating profit rose by 38%. Analyst Nam explained, “The primary reason for the revenue increase, despite the weakening of the won against the dollar, was that the average selling prices (ASPs) for DRAM and NAND rose by the mid-to-high 20% range compared to the previous quarter.”

He also forecast that the fourth quarter would exceed market expectations. Analyst Nam estimated fourth-quarter consolidated revenue at 128.8 trillion won—a 23% increase from the previous quarter—and operating profit at 101 trillion won, up 21%. These figures significantly exceed the consensus estimates (revenue of 110.7 trillion won and operating profit of 87 trillion won). He said, “The key driver of fourth-quarter earnings will be DRAM bit shipments, for which the company has forecast a mid-20% increase.”

He also assessed that concerns regarding shareholder returns have been dispelled. Analyst Nam said, “One of the reasons for skepticism toward investments in domestic companies was the uncertain shareholder return policy,” adding, “SK hynix’s third-quarter earnings announcement will serve as a major step toward alleviating these concerns.” SK hynix announced that the total amount allocated for employee performance bonuses and shareholder returns this year is approximately 100 trillion won. In addition to cash dividends totaling 30 trillion won (14 trillion won in the third quarter and 16 trillion won in the fourth quarter), the company plans to execute an additional 20 trillion won in share buybacks and cancellations, on top of the existing 40 trillion won. Based on the company’s statement, cash dividends derived from investment returns on Kioxia are expected to total 7 trillion won in the third quarter and at least 9 trillion won in the fourth quarter.

From a valuation perspective, the stock was assessed as being significantly undervalued. The current stock price corresponds to a price-to-earnings ratio (PER) of 2.4 times and a price-to-book ratio (PBR) of 1.7 times based on next year’s projected earnings. Analyst Nam stated, “The stock price correction that has continued since June contradicts this undervaluation,” adding, “It is undeniable that concerns over inflation driven by rising oil prices and fears of interest rate hikes have created uncertainty not only in the stock market but also in the business ecosystem.”

Nevertheless, he viewed the recent stock price correction as already excessive. Analyst Nam emphasized, “The recent stock price correction has already fully reflected the magnitude of ASP declines (50–60% year-over-year) that occurred during past memory semiconductor downturns,” adding, “It is important to recognize that, in reality, memory semiconductor ASPs have not fallen, and shipment volumes are increasing at a faster rate than expected.” He went on to predict, “At this point, stock prices will move beyond the concerns of the past and reflect robust demand for memory semiconductors, thereby recovering a portion of their losses.”