SK Hynix Inc.

The stable outlook on SK Hynix reflects our expectation that the company will maintain its debt-to-EBITDA ratio at 0.6x–1.0x over the next two years despite challenging industry conditions. This is mainly due to the company's good position in the global DRAM market. We could lower our rating if SK Hynix's deteriorating competitive position significantly weakens its profitability and operating cash flows. A downgrade trigger could be the ratio of debt to EBITDA exceeding 1.5x on a sustained basis. The ratings could also come under pressure if: (1) the company's growth strategy and financial policy--and therefore its debt leverage—become significantly more aggressive than we factor into the rating; or (2) weakening ties between SK Hynix and its parent cause us to

...Operating performance to stabilize in 2020. SK Hynix Inc. is one of the largest producers of memory semiconductors globally, with 28%-29% dynamic random access memory (DRAM) market share as of Sept. 30, 2019. About 80% of the company's sales come from DRAM (rest is from NAND). Memory prices fell rapidly in 2019 due to supply glut amid demand slowdown. We therefore estimate SK Hynix's EBITDA fell by 59% in 2019. We expect a rebound in 2020 with about 10% rise in EBITDA because the memory cycle will likely bottom out and stabilize from mid-2020....

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