Author: Long Yue
On July 13th, South Korean brokerage KIS released a second-quarter earnings forecast report for SK Hynix. The report predicts SK Hynix Q2 revenue of 80.9 trillion won, a 54% increase sequentially and a 264% surge year-over-year; operating profit is forecasted at 60.4 trillion won, up 61% sequentially and a massive 556% increase year-over-year.
The numbers appear impressive, but the problem lies in: The market consensus expectation was 65 trillion won. KIS's forecast is about 8% below consensus.
This discrepancy directly ignited the market.
After the Korean stock market opened, SK Hynix's stock price quickly fell over 10%, breaching the 2 million won mark, marking a correction of 33% from its historical high on June 25th within just three weeks.
High HBM Share Instead Weighed on ASP
KIS explained the core reason for the profit falling short of consensus in the report: SK Hynix has a higher proportion of HBM (High Bandwidth Memory) revenue compared to peers, with a higher shipment share, leading to a lower increase in its Average Selling Price (ASP) compared to the market average.
This logic seems counterintuitive at first glance – HBM is a high-end product, so shouldn't a higher proportion be more profitable?
The key lies in the pricing structure. HBM is typically priced under Long-Term Supply Agreements (LTAs), which lock in relatively fixed contract prices that do not adjust sharply in the short term with market conditions. In contrast, ordinary DRAM and NAND have higher price elasticity in the spot market; when the overall market price increases, the ASP increase for these products can be even greater.
SK Hynix's higher HBM share means it "benefited less from the price hike dividend" in this round of market-wide average price increase compared to peers.
Meanwhile, spot average prices for ordinary DRAM and NAND continued to soar – KIS predicts Q2 DRAM average prices rose about 30% sequentially, and NAND about 50% – but Hynix's overall ASP increase was "dragged down" by the contract prices of HBM.
Downgrade Due to LTA Recalculation, Not Fundamental Deterioration
KIS explicitly stated in the report that this downgrade was not a concern over performance, but a revision result after incorporating the pricing assumptions of already signed Long-Term Supply Agreements (LTAs) into the calculation.
The original report wording is: "This is the result of making the forecast more realistic by incorporating already signed LTAs into the price assumption, not a concern over performance."
KIS also lowered its operating profit forecasts for 2026 and 2027 by approximately 9% and 11%, respectively, compared to previous estimates. However, the brokerage emphasized that as HBM4 begins mass production and shipment from the third quarter, the rise in market average prices will drive overall ASP higher, at which point SK Hynix's ASP increase will revert to market average levels.
KIS predicts the operating profit margin will reach 74.6% in Q2 2026, a record high, and continue to rise quarter by quarter thereafter.
The brokerage maintains a target price of 3.8 million won and an Overweight rating, believing this forecast downgrade is only a short-term disturbance and does not change the medium-to-long-term upward trend in performance.
"Soaring 556% Yet Missing Expectations": A Crack in Market Sentiment
A 556% year-over-year increase is an extremely strong number in any industry. But the logic of the capital market is: What matters is not how much it increased, but whether it met expectations.
The market had already fully priced in the previous consensus expectation of 65 trillion won. KIS's forecast is about 4.6 trillion won lower than this number, effectively declaring "expectations were too high."
This triggered two layers of concern: the first is the direct impact of short-term performance falling short of expectations; the second is whether the high HBM share constitutes a structural risk – meaning the more SK Hynix bets on HBM, the more limited its ASP flexibility becomes during the contract price lock-in period.
Compounding this, SK Hynix just listed on the US stock market last Friday, and some funds that bet on the "IPO pop" chose to cash out after the ADR listing, further intensifying selling pressure.
Sell-off Spreads: Hong Kong ETFs, A-share Memory Stocks Also Tumble
SK Hynix's decline quickly spread to surrounding markets.
In Hong Kong, the 2x leveraged long SK Hynix ETF fell over 22% in a single day, and the 2x leveraged long Samsung Electronics ETF fell over 13%.
A-share memory concept stocks followed suit, with multiple core names like GigaDevice, Ingenic Semiconductor, Longsys, and BIWIN Storage falling over 7%.
However, from a broader perspective, the memory semiconductor sector as a whole has entered a correction phase over the past two weeks, with some individual stocks falling more than 20%, touching the technical bear market boundary. Behind this, there are also factors related to global funds rebalancing allocations within the AI sector and across markets, including the rotation logic of "selling chips, buying cloud," as well as the staged rebound in the Hong Kong market attracting fund inflows.
Brokerage: Long-term Logic Unchanged, Focus on Profit Sustainability
Despite causing market turbulence, KIS's overall stance in the report is not pessimistic.
The brokerage believes that as the memory industry shifts towards 3-to-5-year LTA contract structures, the core driver of corporate valuation will transition from "single-quarter ASP increase" to "how long high profitability can be sustained."
The KIS report states: "From now on, the focus needs to be on the sustainability of profits. The expansion of LTAs is reducing the long-standing performance volatility of the memory industry."
The brokerage expects that as the proportion of contract-based revenue increases, and HBM capacity expansion squeezes overall supply, SK Hynix's high profit level will be maintained long-term, and its valuation will be repriced accordingly.
The target price of 3.8 million won still implies significant upside from the current stock price, and KIS maintains its Overweight rating.
