Q3 results due Wednesday
Quarterly operating profit forecast to exceed 80 trillion won
Share price down 30% despite historic earnings
Long-term supply contract share of output a key focus
With SK hynix set to report its third-quarter earnings Wednesday, investor attention is focused less on the scale of its profits than on any new shareholder return plans the company may announce. The chipmaker is expected to post a record quarterly operating profit of nearly 80 trillion won ($60.5 billion), yet its share price has fallen 30% over the past month. Growing skepticism worldwide about the returns on AI investment has also put the sustainability of the memory chip boom under scrutiny.
Forecasts from 10 brokerages put SK hynix's average third-quarter sales at 96.97 trillion won and operating profit at 76.26 trillion won. The company had already set all-time records in the second quarter, posting sales of 79.32 trillion won, operating profit of 60.54 trillion won and an operating margin of 76.3%. Its full-year operating profit for this year is projected to reach 262.7 trillion won.
Despite the strong earnings, the share price has fallen sharply. SK hynix stock closed at 1.816 million won on July 27, just before the second-quarter results were released, but had dropped to 1.275 million won by Monday — a decline of 29.8% in roughly three months.
Concerns over the profitability of AI investment and the durability of the memory chip boom have weighed on the stock, as has a controversy over potential shareholder value dilution stemming from a review of a US listing for Solidigm, the company's indirect subsidiary.
Against that backdrop, attention at this week's earnings release is expected to center on how much future demand SK hynix has locked in through long-term supply agreements, known as LTAs.
The share of total production volume covered by such contracts, along with their duration, will offer a gauge of whether the company can sustain stable earnings beyond 2028, when memory supply is expected to increase significantly.
Analysts remain broadly optimistic. KB Securities forecast that Samsung Electronics' operating profit next year will reach 555 trillion won and SK hynix's 389 trillion won, representing roughly 50% growth from this year. The brokerage also estimated that 70 to 80 percent of the memory output that Samsung Electronics and SK hynix plan to produce next year is already committed under five-year long-term supply contracts with major global technology companies.
Expanding long-term supply agreements is expected to buffer volatility from shifts in the semiconductor cycle while supporting continued earnings growth.
Additional shareholder return measures are another focal point of the results announcement. SK hynix completed a 40 trillion won buyback on Wednesday.
Any new shareholder return plan will be the first since the company halted its review of a Solidigm listing, making it closely watched for how effectively it addresses lingering concerns about shareholder value dilution that the dual-listing controversy had raised.
Under the company's policy of allocating more than 50 percent of free cash flow to shareholder returns — through buybacks, share cancellations and dividends — additional returns could reach the 50 trillion to 60 trillion won range, analysts said.
One option under discussion is using proceeds from the sale of its stake in Japanese NAND flash maker Kioxia to fund special dividends or other shareholder return measures.
Industry estimates put the pretax gain from the Kioxia stake sale at more than 20 trillion won — nearly 10 times the 2.1 trillion won in total dividends SK hynix paid last year.
"SK hynix is likely to announce enhanced shareholder return measures that exceed existing expectations," said Kim Seon-woo, an analyst at Meritz Securities. Kim Hyeong-geun of Daishin Securities also said the company was "highly likely to execute early shareholder returns for the purpose of enhancing shareholder value."
gil@heraldcorp.com
