BNK Investment & Securities cut its target price for SK Hynix to 1.48 million KRW from 1.85 million KRW on July 29, immediately following the company's second-quarter earnings announcement. The downgrade reflects slowing demand momentum and concerns over future oversupply in the memory chip market. BNK became the first Korean brokerage this year to suspend its buy rating on SK Hynix, and analyst Lee Min-hee now cites weakening consumer sentiment, declining NAND spot prices since late April, and a shift by hyperscalers toward cost-effective AI infrastructure investments as key factors behind the reduced outlook. SK Hynix's Q2 results—revenue of 79.32 trillion KRW and operating profit of 60.54 trillion KRW—missed consensus estimates by 5% and 6% respectively, reinforcing the analyst's cautious stance on the Korean stock.
SK Hynix Q2 Earnings Miss Consensus by 5-6%
SK Hynix reported second-quarter revenue of 79.32 trillion KRW and operating profit of 60.54 trillion KRW, falling short of analyst consensus by 5% and 6% respectively. In the first quarter, per-chip cost increases exceeded expectations, while in the second quarter, DRAM average selling price (ASP) gains were lower than anticipated due to product mix effects.
BNK Cites Demand Momentum Slowdown
Analyst Lee Min-hee attributed the target price reduction to weakening demand signals across the memory chip sector. "Consumer sentiment has deteriorated, and NAND spot prices have been trending downward since late April," Lee stated. "OECD leading indicators have also turned downward simultaneously." The analyst noted that hyperscalers are shifting their artificial intelligence (AI) infrastructure investment strategies toward cost-effectiveness. Lee also expressed concern over funding uncertainty: "Most of this year's planned investment amounts rely on borrowing, and doubts about fundraising are growing amid rising interest rates and capital market instability."
Analyst Flags Oversupply Risk from Capacity Expansion
Lee raised concerns about a potential shift to oversupply conditions despite the current demand slowdown trend. "Manufacturers are announcing large-scale new capacity expansion investments one after another, optimistic about long-term demand even as demand flows are slowing," the analyst said. Lee emphasized that the successful IPO of Changxin Memory Technologies (CXMT) at the peak of the industry cycle is having a negative impact in terms of intensifying competition.
BNK Forecasts Limited Stock Rebound
Based on these factors, BNK Investment & Securities set the new target price at 1.48 million KRW for SK Hynix. "While SK Hynix's stock is in a short-term oversold phase, manufacturers' competitive capacity expansion attitudes are unlikely to change easily," Lee said. "The demand slowdown trend in the second half is expected to continue, so the stock price rebound is also expected to be limited."
FAQ
Why did BNK Investment & Securities cut SK Hynix's target price on July 29?
BNK Investment & Securities reduced SK Hynix's target price to 1.48 million KRW from 1.85 million KRW due to slowing demand momentum, declining NAND spot prices since late April, downward-turning OECD leading indicators, hyperscalers shifting to cost-effective AI investments, rising interest rates affecting funding, and oversupply concerns from competitive capacity expansion announcements.
How did SK Hynix's Q2 earnings compare to analyst expectations?
SK Hynix's second-quarter revenue of 79.32 trillion KRW and operating profit of 60.54 trillion KRW missed consensus estimates by 5% and 6% respectively. First-quarter per-chip cost increases exceeded expectations, and second-quarter DRAM average selling price gains were lower than anticipated due to product mix effects.
