SK Hynix: More room for share price rise after bull run

SK Hynix Inc.'s market value broke through the roof to top 150 trillion won ($110 billion) on Monday, becoming the second stock in South Korea to reach that milestone after Samsung Electronics Co., thanks to investors' insatiable appetite for the country's second-largest memory chip maker.  

Amid the ongoing AI euphoria, SK Hynix, also the world’s leading high-bandwidth memory (HBM) chip maker, is expected to remain on a roll for some time, market analysts are forecasting. 

SK Hynix on Monday closed at its record high of 201,500 won after rising 1.5% from the previous session.

Based on the intraday high of 209,000 won, its market capitalization hit 152.15 trillion won, becoming the second Korean stock to break the 150 trillion won market cap threshold after its bigger crosstown rival Samsung Electronics, which broke the mark on Dec. 1, 2011.

Its recent bull run has been driven by brisk sales of its HBM chips, a key component of the so-called AI semiconductor.

As the company is projected to swing to an operating profit of about 20 trillion won this year from a loss of 7.7 trillion won last year, the securities industry is betting on SK Hynix's share price run to continue.

Citigroup Global Markets Korea Securities even forecasted that SK Hynix’s market cap would swell to 220 trillion won.

BRISK SALES WILL SHORE UP THE OPERATING PROFIT

SK Hynix shares gained 82.7% over the last year and 42.4% so far this year.

The rally was unthinkable late last year due to unfriendly market conditions, dragging down the prices of its mainstay products dynamic random-access memory (DRAM) and NAND flash chips that caused SK Hynix huge losses.

But there was a sea change in investors’ sentiment toward the company early this year thanks to brisk sales of AI chips in line with strong demand for AI accelerators dominated by Nvidia Corp.

HBM is a high-value, high-performance memory that vertically interconnects multiple DRAM chips, dramatically increasing data processing speed compared with earlier DARM products.

Demand for the chips, called AI chips, is soaring as it powers generative AI devices or accelerators that operate on high-performance computing systems. A set of HBM chips is used with a graphics processing unit (GPU) to make an AI accelerator, which is dominantly produced by Nvidia.

It is five to 10 times pricier than general DRAM products but its price is projected to climb higher as SK Hynix is almost the sole provider of the most up-to-date HBM series in the world.

SK Hynix was the world’s first to develop HBM chips in 2013 and is the exclusive provider of fifth-generation HBM, HBM3E, to Nvidia.

It will supply its HBM chips for Nvidia’s new AI accelerator called Blackwell due to be out in the second half of this year.

In line with the rising price of HBM chips, the market consensus for SK Hynix’s operating profit for this year was revised upward to 19.29 trillion won from the previous estimate of 11.06 trillion won three months ago.

Some analysts even said the company’s operating profit for this year could surpass the company’s historic high of 20.84 trillion won recorded in 2018.

MORE ROOM TO RISE

Thanks to the rosy outlook, SK Hynix shares are expected to rise more, market analysts said.

Citigroup Global Markets Korea Securities set SK Hynix's stock target price at 310,000 won, which could elevate the stock’s market cap to 225 trillion won, 56% above the current market cap.

On Monday, foreign investors net bought 380.2 billion won worth of SK Hynix shares. Up to now, offshore investors gobbled up 2.84 trillion won worth of SK Hynix shares, making the stock the third-most popular Korean stock after Samsung Electronics and Hyundai Motor Co.

Based on SK Hynix's closing stock price on Monday, its market cap stood at 146.69 trillion won, about 31.9% Samsung Electronics' market value. This is the narrowest-ever market cap gap between the top two Kospi stocks.

SK Hynix's market cap was valued at just 15.8% that of Samsung Electronics' on Sept. 10, 2020.

Its stock performance, however, hinges on Samsung Electronics’ performance in the HBM market, market analysts said.

Samsung is still the world’s No. 1 memory chip maker, but it lags behind SK Hynix in HBM chip development.

However, Nvidia is expected to tap Samsung Electronics’ HBM products for its AI accelerators to diversify its HBM chip suppliers, said Kim Dong-won, managing director at KB Securities Co.

“As the HBM market is burgeoning, both Samsung Electronics and SK Hynix stand to benefit from it,” added Kim.

Write to Ik-Hwan Kim at lovepen@hankyung.com

Sookyung Seo edited this article.