...HONG KONG (S&P Global Ratings) April 27, 2023--SK Hynix Inc.'s rating headroom has narrowed with its weak operating results in the first quarter. SK Hynix's (###-/Negative/--) poor operating performance in the first quarter of 2023 was largely in line with our previous expectation. However, its debt rose faster than we had expected. The debt increase, plus the recent operational challenges, crimped the rating headroom for the Korea-based supplier of memory chips. We forecast SK Hynix's EBITDA at Korean won (KRW) 5 trillion¡KRW7 trillion for 2023 and KRW12 trillion¡KRW14 trillion in 2024. This would lead to a debt-to-EBITDA ratio of 3.5x¡4.5x in 2023, before improving to 1.5x¡2.3x in 2024. Although its 2024 leverage is likely to be close to or below our downside threshold of above 2.0x, the buffer is thin. However, our base-case assumption of a second-half recovery remains intact; we consider the cyclical nature of the memory chip industry, and a likely recovery in demand along with inventory...
