Korean chip stocks restrained in uplift by sanguine DRAM prospects

2022.01.12 13:07:56 | 2022.01.12 16:48:30

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Excitement from stock upgrade and bullish outlook by foreign institutions on South Korea’s memory majors was short-lived.

In its latest report, Goldman Sachs raised its rating on SK hynix stock to a buy from a neutral and hiked its target price by 41.6 percent to 170,000 won ($142.85). In late October last year, the global investment bank had slashed SK hynix stock target price by 30 percent to 120,000 won.

The bank also raised price target for Samsung Electronics Co. stock to 107,000 won from 100,000 won. Shares of SK hynix and Samsung Electronics were mostly slow on Wednesday, closing the day 0.39 percent higher at 128,500 won and flat at 78,900 won, respectively. SK hynix shares had ended the previous day 2.8 percent higher and Samsung Electronics up 1.15 percent upon the upgrade.

Goldman Sachs in the latest report said DRAM chip demand for PCs and servers was stronger than expected while supply tightened as dominant player Samsung Electronics paid more attention on expanding foundry business. The fast thinning inventory levels at DRAM users will also fuel faster price growth, it added.

DRAM spot market price, which commonly serves as a base indicator for pricing future contracts, headed higher from late December and will stay northbound throughout the year, according to Goldman Sachs. Transition from DDR4 to DDR5 is also driving up demand for server DRAM modules and its demand will be as big as the mobile DRAM market by 2025, it said.

Amid rosy market outlook, Goldman Sachs revised up its projection on SK hynix’s first-quarter operating income to 3.4 trillion won from 2.8 trillion won, and for the second quarter, to 3.4 trillion won from 2.5 trillion won.

Other global investment firms are also presenting brighter outlook on memory chip demand. Last Thursday, Citigroup upgraded its stock price target for SK hynix to 190,000 won from 135,000 won. It was followed by UBS, raising its target to 181,000 won from 169,000 won.

Foreign investors have been returning to pick up SK hynix and Samsung Electronics shares, helping their prices to rebound. SK hynix shares had endured a significant fall for months after Morgan Stanley in August last year slashed its price target to 80,000 won from 156,000 won while offloading 350,000 pieces of SK hynix from its holding.

By Kim Je-gwan and Cho Jeehyun

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