Research Update: SK Hynix Outlook Revised To Stable From Negative After AI Chip Expansion Ups Recovery Prospects; 'BBB-' Rating Affirmed

We expect SK Hynix Inc.'s operating results will improve meaningfully over the next six to 18 months, given its lead in the rapidly expanding generative AI memory chips market, including high-bandwidth memory 3 (HBM3). Despite ongoing losses from SK Hynix's NAND flash business, we forecast stronger profitability and cash flows from the Korean chipmaker's DRAM business, which is likely to result in positive free operating cash flow (FOCF) in 2024. We believe the company will lower its leverage to 1.1x in 2024, compared with our estimate of 4.3x in 2023. On Dec. 14, 2023, S&P Global Ratings revised its rating outlook on SK Hynix Inc. to stable from negative, and affirmed the long-term issuer credit rating and senior unsecured issue

...- We expect SK Hynix Inc.'s operating results will improve meaningfully over the next six to 18 months, given its lead in the rapidly expanding generative AI memory chips market, including high-bandwidth memory 3 (HBM3). - Despite ongoing losses from SK Hynix's NAND flash business, we forecast stronger profitability and cash flows from the Korean chipmaker's DRAM business, which is likely to result in positive free operating cash flow (FOCF) in 2024. We believe the company will lower its leverage to 1.1x in 2024, compared with our estimate of 4.3x in 2023. - On Dec. 14, 2023, S&P Global Ratings revised its rating outlook on SK Hynix Inc. to stable from negative, and affirmed the long-term issuer credit rating and senior unsecured issue rating at '###-'. - The stable outlook is based on our expectation that SK Hynix will meaningfully improve its profitability and credit metrics over the next six to 12 months such that its debt leverage will drop below our threshold of 2x for the current...

Research Update