Abstract:
About three months ago, SK Group Chairman Choi Tae-won gave a "hold" recommendation on SK Hynix stock. However, the stock's current price is still down nearly 60% from its high point. Many retail investors who entered the market near the high level were deeply locked up, and fell into a situation where they neither dared to cut their profits nor were able to increase their positions.
According to data from the Korean Exchange, SK Hynix closed at 1.277 million won on Thursday, an increase of 54,000 won, or 4.42%, from the previous trading day. Affected by the sharp decline in U.S. chip stocks, the stock once fell to 1.171 million won during the session, and then rebounded to recover its losses.
This rebound stems from the company's decision to terminate the listing evaluation of its US subsidiary Solidigm. Before the market opened, SK Hynix announced that it would suspend Solidigm’s pre-listing financing and IPO plan evaluation. Shareholders have been worried that Solidigm's separate listing would damage the group's overall value due to dual listing discounts. Lee Yi-won, chairman of the Korean Financial Commission, also stated the day before that Solidigm’s listing in the United States will be subject to the country’s dual listing regulatory rules.
However, the previous large-scale buyback plan that supported the stock price has ended, and supply and demand pressures have reappeared. SK hynix completed stock buybacks totaling approximately 40 trillion won on October 21, approximately one month ahead of schedule. During the repurchase cycle from August 20 to October 21, institutional funds sold net 2.68 trillion won, and foreign capital sold as much as 25.66 trillion won. Analysts believe the stock's cushion has thinned as the company no longer absorbs selling pressure. Dasin Securities said that the end of the repurchase does not mean that the stock price will continue to decline, but short-term fluctuations will be amplified.
In this context, Cui Taiyuan’s previous remarks once again aroused heated discussion in the market. On July 17, he said at the Korea Chamber of Commerce and Industry Summer Forum held in Jeju Island that as demand for memory chips continues to improve, stock prices will rise in the long term. But since then, the stock price has struggled to repair.
Retail investors who concentrated on buying at high levels became the main losers. April to June was the high point range of the stock market, with net purchases by individual investors totaling 31.5 trillion won; the stock price hit a record high in June, with retail investors net buying 15.63 trillion won in a single month.
Even though the stock price plummeted from 2.5 million won to 1.3 million won in July, retail investors still bought a net 9.001 trillion won, continuously diluting the cost of holding positions. However, the stock price subsequently dropped further to around 1.2 million won, and the dilution operation did not allow them to avoid losses. NH Investment Securities data shows that as of October 19, 74.18% of investors holding SK Hynix were in the red.
The market's attention has now turned to the third quarterly report to be released on October 28. SK hynix plans to announce a new round of shareholder return plan simultaneously in its financial report. FnGuide's consensus forecast shows that SK Hynix is expected to hit a new high in single-quarter operating profit, with market expectations of 76.964 trillion won. However, the outstanding performance has already been priced in, and whether it can launch a policy of exceeding expected shareholder returns may become the core variable for the stock price rebound.
Merrill Lynch Securities said that based on Wednesday's closing price, the stock's expected price-to-book ratio next year is only 1.10 times, which is at a historical low; if stronger shareholder return measures are introduced, it is expected to highlight the valuation depression.
Merrill Lynch analyst Jin Shanyu commented on Solidigm's termination of listing: "We believe that the company has made it clear that enhancing shareholder value has a higher priority than the previously planned expansion route." He added: "We look forward to this earnings conference call for the company to come up with a more effective and specific shareholder return plan."
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