SK Hynix Earnings: DRAM Prices Continue to Rise, but at a Slower Pace; Shares Slightly Overvalued

Although SK Hynix’s June-quarter results beat our forecasts and were in line with the PitchBook consensus, the stock fell about 9% in the following trading session as we believe that DRAM average selling price growth fell short of the market’s expectations, accelerating the risk-off trend. The company reported sequential ASP growth in the midteens for the June quarter, which was lower than the 20%-plus ASP growth in the March quarter and also lower than the 20% ASP growth reported by Micron Technology in the May quarter. This may have raised concerns that the pace of DRAM price increases has slowed, as we have warned in recent months. We had expected that memory price increases would likely be skewed toward the first half of the year, although the supply/demand balance for memory will remain tight throughout the year, and the outperformance of SK Hynix’s share price this year was a bit too optimistic. With SK Hynix’s share price down more than 20% in the past two weeks, we believe it is currently slightly overvalued.