SK Hynix

(000660 KS)
1Q ends on a promising note

Technology What’s new: 1QP earnings beat consensus

SK Hynix reported 1QP revenue of W2.78tr (+2% QoQ; +16% YoY), an operating profit
Results Comment of W317bn (+352% QoQ; turning to profit YoY), and an OP margin of 11.4%. The results
exceeded both the market consensus (OP of W214bn) and our estimates (OP of
April 25, 2013
W249bn). Stronger-than-expected numbers were primarily driven by: 1) higher PC DRAM
prices and 2) improved cost efficiency resulting from the 20nm technology migration. It
is also worth noting that the chipmaker’s EBITDA (W1.09tr) has topped the W1tr mark
(Maintain) Buy for the first time in seven quarters (since 2Q11).

Target Price (12M, W) 38,000 We foresee sharp earnings growth ahead in 2Q. We adjusted up our 2Q estimates to
revenue of W3.2tr (+16% QoQ; +23% YoY), operating profit of W580bn (+83% QoQ; vs.
Share Price (04/24/13, W) 29,100 our previous estimate of W400bn), and an OP margin of 18.0%. We see a number of
positive catalysts supporting 2Q earnings growth: 1) higher PC DRAM prices, 2) stronger
Expected Return 31% demand for mobile DRAM and embedded NAND, 3) rising server DRAM prices, 4) cost
advantages from technology migration, and 5) easing raw material (wafer) costs on yen
depreciation.
OP (13F, Wbn) 2,154
Catalysts: Mobile DRAM market to tighten from 2Q
Consensus OP (13F, Wbn) 1,725
The largest driver behind SK Hynix’s 1Q earnings growth was a faster-than-expected rise
EPS Growth (13F, %) TTB in PC DRAM prices. We think the biggest earnings catalyst for 2Q will be shipment
Market EPS Growth (13F, %) 20.0 growth of mobile DRAM.
P/E (13F, x) 11.7
Market P/E (13F, x) 9.3 In our view, the Galaxy S4’s adoption of a 2GB LPDDR3 mobile memory underscores two
KOSPI 1,935.31 major shifts underway in the mobile DRAM market: 1) the sharp increase in average
content per device (from 1GB to 2GB), and 2) a change in the core chip used in devices
Market Cap (Wbn) 20,200 (from LPDDR2 to LPDDR3). We believe Samsung Electronics’ (SEC) growing internal
Shares Outstanding (mn) 694 demand for mobile DRAM will lead to a tighter market across the board (including multi-
Free Float (%) 74.2 chip packages) beginning at the end of 2Q.
Foreign Ownership (%) 28.1
Beta (12M) 1.43 As for embedded NAND, we do not expect any significant content growth akin to that of
52-Week Low (W) 20,100 mobile DRAM. But we still project the market to remain balanced on the back of: 1)
52-Week High (W) 29,700 smartphone shipment growth, 2) disciplined capacity expansion and supply, and 3)
stronger SSD demand.
(%) 1M 6M 12M
Absolute 2.8 21.3 6.8 Valuation: 2013F OP of W2.15tr; Raise TP to W38,000
Relative 3.5 20.1 8.2 We revise up our target price on SK Hynix to W38,000 (from W36,000), using a 2013F
Share price
P/B of 2.6x and P/E of 15x. We raised our 2013F operating profit by 23% to W2.15tr
110 KOSPI (from W1.75tr), resulting in a 2013F ROE of 16.6% (vs. 14.4% previously). We thus do
100 not think current valuations (2013F P/B of 2x and P/E of 11.7x) are stretched.
90
80 SK Hynix has gotten off to a very good start this year. We estimate 2013 annual EBITDA
70 at W5.3tr. Even if the company spends W3.5tr on capex, this would still leave it with a
60 free cash flow (FCF) of W1.5tr. And we could even see a higher FCF of W2tr in 2014
4/12 8/12 12/12 4/13 given conservative capex and the projected robust growth in mobile DRAM. If so, we
believe the current up cycle could last much longer than expected.
Daewoo Securities Co., Ltd.
FY (Dec.) 12/10 12/11 12/12 12/13F 12/14F 12/15F
Semiconductor Revenue (Wbn) 12,106 10,396 10,162 12,828 14,280 14,626
OP (Wbn) 2,975 369 -227 2,154 2,812 2,288
James Song
OP margin (%) 24.6 3.6 -2.2 16.8 19.7 15.6
+822-768-3722
james.song@dwsec.com NP (Wbn) 2,621 -57 -159 1,734 2,387 1,929
EPS (W) 4,440 -96 -233 2,498 3,439 2,778
Joon-ho Jang
ROE (%) 39.2 -0.7 -1.8 16.6 19.6 13.9
+822-768-3241
P/E (x) 5.4 - - 11.7 8.5 10.5
joonho.jang@dwsec.com
P/B (x) 1.9 1.8 2.0 2.0 1.7 1.5
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S.
April 25, 2013 SK Hynix

Company Snapshot

SK Hynix (000660 KS/CP: W29,100/TP: W38,000)

Investment thesis Target price assumptions

nd
 Leading global memory maker: 2 Operating assumptions: Strong, steady bit growth of both DRAM (~30%
largest market share (24.7%) in DRAM and pa in 2013-14) and NAND (+44% in 2013). DRAM ASP to decline by 4.8%
4th largest (11.8%) in NAND in 2012. and NAND by 5.4% in 2013. Global smartphone shipments to increase by
Smooth tech migration and enhanced 210mn units in 2013.
technology support market share gains Target price assumptions: Applied a fair P/B of 2.6x (reflecting fair risk
 Rising demand for MCP: Mobile device premium and earnings yield) to a 2013F BPS of W14,567. A valuation
memory demand to increase steadily premium seems justified as SK Hynix’s earnings are anticipated to turn
along with the rapid expansion of the low- around this year, and sustain growth in the medium to long term.
end smartphone market, mainly in China
 Steady rise in PC DRAM prices: PC DRAM Key variables
is in short supply as major memory 2011 2012 2013F 2014F
makers focus on mobile device memory DRAM bit growth (%) 51.3 50.8 34.1 30.0
NAND bit growth (%) 93.8 46.7 43.9 55.0
Catalysts
DRAM ASP change (%) -47.3 -36.2 -4.8 -18.0
 Surging PC DRAM prices, backed by major
NAND ASP change (%) -40.8 -44.4 -5.4 -20.0
memory makers increasing the production
Global smartphone shipments (mn
of mobile DRAM should push DRAM 471.7 640.6 853.0 985.4
unit)
division margins sharply higher.
 Steady rise in mobile DRAM and NAND Peer valuations
demand due to the growing popularity of
P/E P/B ROE
mobile devices and increasing memory
content. 2012 2013F 2012 2013F 2012 2013F
SK Hynix 11.7 8.5 2.0 1.7 16.6 19.6
 Rapid growth of China’s low-end
Samsung Electronics 7.2 6.5 1.6 1.3 24.0 21.1
smartphone market in 2013 should
Micron - 11.9 1.3 1.2 -5.0 10.8
increase demand for SK Hynix’s MCP in
the medium to long term. Nanya - - 57.2 67.3 - -486.0
Inotera 77.4 6.8 1.9 1.5 6.3 20.3
 Acquisition of controller maker LAMD in
Toshiba 20.1 13.4 2.2 2.0 12.4 16.7
2012 is anticipated to boost SK Hynix’s
competitiveness in solid state drive (SSD)
beginning in 2H13 DRAM (DDR3 2Gb 1333MHz) price trend

Risks (US$) DDR3 2Gb spot price

KDB Daewoo forecasts
3.0 DDR3 2Gb contract price
 Upside: (i) sharp rebound and steady rise Quarterly avg. contract price
in PC DRAM prices, (ii) rapid market 2.5

adoption of new businesses (SSD, etc.)

2.0
 Downside: (i) sharp decline in mobile
DRAM prices, (ii) drop in NAND price 1.5
following capacity expansions at major
1.0
makers
0.5 Elpida bankruptcy Expansion of mobile DRAM proportion
for major memory players
0.0
1/11 7/11 1/12 7/12 1/13 7/13F
7/13 1/14F
1/14

Source: DRAMeXchange, KDB Daewoo Securities estimates

KDB Daewoo Securities Research 2

April 25, 2013 SK Hynix

Valuation summary

Table 1. P/B valuation (W, x, %)

2013F Notes
Share price 29,100 A
2013F BPS 14,567 B
P/B 2.00 C=A/B
2013F ROE 16.6% D
Earnings yield 8.3% E=D/C
Risk-free rate (3-year government bond) 2.6% F
Risk premium 5.7% G=E-F
Target risk premium 3.8% H
Target earnings yield 6.4% I=F+H
Target P/B 2.60 J=D/I
Target price 38,000 K=B*J
Source: Company data, KDB Daewoo Securities Research estimates

Table 2. Global memory companies’ earnings and valuation metrics (Wbn, %, x)

Market Revenue OP OP margin NP P/E P/B ROE
cap 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F
SEC 218,887 237,562 261,567 39,840 43,776 16.8 16.7 32,092 35,082 7.2 6.5 1.6 1.3 24.0 21.1
SK Hynix 20,200 12,828 14,280 2,154 2,812 16.8 19.7 1,734 2,387 11.7 8.5 2.0 1.7 16.6 19.6
Micron 10,828 9,668 11,690 136 1,237 1.4 10.6 -492 884 - 11.9 1.3 1.2 -5.0 10.8
Nanya 5,149 1,432 1,498 -1,244 -928 -86.9 -61.9 -730 -450 - - 57.2 67.3 - -486.0
Inotera 2,092 1,597 1,809 136 388 8.5 21.4 6 239 77.4 6.8 1.9 1.5 6.3 20.3
Toshiba 25,368 67,476 71,456 2,896 3,873 4.3 5.4 1,278 1,905 20.1 13.4 2.2 2.0 12.4 16.7
SanDisk 14,507 6,460 7,087 1,570 1,845 24.3 26.0 1,096 1,276 13.3 11.5 1.7 1.5 11.4 11.8
Average -2.1 5.4 25.9 9.8 9.7 10.9 11.0 -55.1
Source: Bloomberg, KDB Daewoo Securities Research estimates

Figure 1. 12-month forward P/B band Figure 2. Quarterly OP and share price
(W'000) (Wbn) Quarterly OP (L) (W'000)
50 1,200 SK Hynix's share price (R) 50

2.4x 800
40 40

2.0x 400
30 30
1.6x
0
20 1.2x 20
-400
0.8x
10 10
-800

0 -1,200 0
04 07 10 13
13F 06 07 08 09 10 11 12 13 F

Source: Company data, KDB Daewoo Securities Research estimates Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 3

April 25, 2013 SK Hynix

Earnings review and outlook

Table 3. 1Q13P review (Wbn, %, %p)

1Q13P Growth
1Q12 4Q12
Actual KDB Daewoo Consensus YoY QoQ
Revenue 2,388 2,718 2,781 2,654 2,745 16.4 2.3
Operating profit -264 55 317 249 214 TTB 476.4
OP margin -11.1 2.0 11.4 9.4 7.8 22.5 9.4
Pretax profit -271 110 208 271 195 TTB 88.4
Net profit -271 164 179 222 173 TTB 9.5
Notes: Under consolidated K-IFRS; TTB refers to “turning to black”
Source: Company data, KDB Daewoo Securities Research, estimates WiseFn consensus

Table 4. Earnings forecast revisions (Wbn, %)

Previous Revised % change
Comments
13F 14F 13F 14F 13F 14F
Revenue 12,325 13,834 12,828 14,280 4.1 3.2
- Increase in mobile-related memory demand,
OP 1,751 2,302 2,154 2,812 23.0 22.1
cost improvements, etc.
Net profit 1,490 2,025 1,734 2,387 16.4 17.9
OP margin 14.2 16.6 16.8 19.7 2.6 3.0
NP margin 12.1 14.6 13.5 16.7 1.4 2.1
Source: KDB Daewoo Securities Research estimates

Table 5. Quarterly and annual earnings (Wbn, %)

1Q12 2Q12 3Q12 4Q12 1Q13P 2Q13F 3Q13F 4Q13F 2011 2012 2013F 2014F
Revenue 2,388 2,632 2,423 2,718 2,781 3,229 3,528 3,290 10,396 10,162 12,828 14,280
% QoQ -6.5 10.2 -7.9 12.2 2.3 16.1 9.3 -6.8
% YoY -14.5 -4.6 5.8 6.5 16.4 22.7 45.6 21.0 -13.2 -2.2 26.2 11.3
DRAM 1,695 1,974 1,696 1,875 1,975 2,298 2,512 2,324 7,418 7,241 9,109 9,921
NAND 693 658 703 843 806 931 1,016 966 2,977 2,921 3,719 4,360
COGS 2,178 2,155 2,014 2,204 2,018 2,188 2,404 2,218 8,721 8,551 8,820 9,469
Gross profit 210 477 409 514 771 1,040 1,124 1,072 1,675 1,611 4,007 4,812
SG&A 474 473 433 459 446 460 460 480 1,306 1,839 1,846 2,000
Operating profit -264 4 -24 55 317 580 664 592 369 -228 2,154 2,812
% QoQ TTR TTB TTR TTB 472.3 83.0 14.5 -10.9
% YoY TTR -98.5 RR -22.5 TTB 14590.0 TTB 969.0 -88.1 TTR TTB 30.6
DRAM -286 98 -11 -15 283 484 539 494 -284 -214 1,800 2,373
NAND 22 -103 -7 70 34 96 125 98 653 -17 354 439
EBITDA 572 771 760 874 1,089 1,347 1,452 1,371 3,572 2,976 5,258 6,421
Net profit -271 -53 2 164 179 460 537 557 -57 -159 1,734 2,387
GP margin 8.8 18.1 16.9 18.9 27.7 32.2 31.9 32.6 16.1 15.9 31.2 33.7
OP margin -11.0 0.2 -1.0 2.0 11.4 18.0 18.8 18.0 3.6 -2.2 16.8 19.7
DRAM -16.9 5.0 -0.7 -0.8 14.4 21.1 21.4 21.2 -3.8 -3.0 19.8 23.9
NAND 3.2 -15.6 -1.0 8.3 4.2 10.4 12.3 10.2 21.9 -0.6 9.5 10.1
EBITDA margin 23.9 29.3 31.3 32.1 39.2 41.7 41.1 41.7 34.4 29.3 41.0 45.0
NP margin -11.4 -2.0 0.1 6.0 6.4 14.3 15.2 16.9 -0.5 -1.6 13.5 16.7
Notes: Under consolidated K-IFRS; TTR refers to “turning to red“; TTB refers to “turning to black”; RR refers to ”remaining red”
Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 4

April 25, 2013 SK Hynix

Figure 3. Annual operating profit and OP margin Figure 4. Quarterly operating profit and OP margin
(Wtr) Anuual OP (L) OP margin (R) (Wbn) Quarterly OP (L) OP margin (R)
4 40 1,200 60
3.09
2.81
800 40
2.15
2 1.87 20
20
400
0.26 0.37
0
0 0 0
-0.12 -0.23 -20
-400
-40
-2 -20
-2.20
-800 -60

-4 -40 -1,200 -80

06 07 08 09 10 11 12 13F 14F 06 07 08 09 10 11 12 13F

Source: Company data, KDB Daewoo Securities Research estimates Source: Company data, KDB Daewoo Securities Research estimates

Table 6. Major metrics and forecasts for the DRAM division (Wbn, %, mn units, US$ )
1Q12 2Q12 3Q12 4Q12 1Q13P 2Q13F 3Q13F 4Q13F 11 12 13F 14F
Revenue (Wbn) 1,695 1,974 1,696 1,875 1,975 2,298 2,512 2,324 7,418 7,241 9,109 9,921
Operating profit (Wbn) -286 98 -11 -15 283 484 539 494 -284 -214 1,800 2,373
OP margin (%) -16.9% 5.0% -0.7% -0.8% 14.4% 21.1% 21.4% 21.2% -3.8% -3.0% 19.8% 23.9%
Shipments (1Gb eq. mn) 1,772 1,896 1,801 2,305 2,374 2,571 2,718 2,763 5,156 7,773 10,426 13,553
Bit growth (% chg.) 9.0% 7.0% -5.0% 28.0% 3.0% 8.3% 5.7% 1.7% 51.3% 50.8% 34.1% 30.0%
ASP (1Gb eq. US$) 0.87 0.93 0.86 0.77 0.80 0.82 0.85 0.77 1.33 0.85 0.81 0.67
ASP (% chg.) -10.1% 7.0% -8.2% -10.4% 3.9% 3.2% 3.4% -9.0% -47.3% -36.2% -4.8% -18.0%
Note: Under consolidated K-IFRS
Source: Company data, KDB Daewoo Securities Research estimates

Table 7. Major metrics and forecasts for the NAND division (Wbn, %, mn units, US$ )
1Q12 2Q12 3Q12 4Q12 1Q13P 2Q13F 3Q13F 4Q13F 11 12 13F 14F
Revenue (Wbn) 693 658 703 843 806 931 1,016 966 2,977 2,921 3,719 4,360
Operating profit (Wbn) 19 -102 -7 85 34 96 125 98 653 -5 354 439
OP margin (%) 2.7% -15.5% -1.0% 10.1% 4.2% 10.4% 12.3% 10.2% 21.9% -0.2% 9.5% 10.1%
Shipments (16Gb eq. mn) 325 354 372 442 438 526 574 610 1,017 1,492 2,148 3,329
Bit growth (% chg.) 2.0% 9.0% 5.0% 19.0% -1.0% 20.2% 9.2% 6.1% 93.8% 46.7% 43.9% 55.0%
ASP(16Gb eq. US$) 1.51 1.23 1.28 1.36 1.29 1.30 1.32 1.17 2.41 1.34 1.27 1.01
ASP(% chg.) -19.0% -18.4% 4.2% 6.0% -5.1% 0.8% 2.0% -11.5% -40.8% -44.4% -5.4% -20.0%
Note: Under consolidated K-IFRS
Source: Company data, KDB Daewoo Securities Research estimates

Figure 5. Operating profit by division Figure 6. OP margin by division

(Wbn) DRAM division's OP (%) DRAM division's OP margin
1,200 NAND division's OP 60 NAND division's OP margin

40
800

20
400

0
0
-20

-400
-40

-800 -60
06 07 08 09 10 11 12 13F 06 07 08 09 10 11 12 13F

Source: Company data, KDB Daewoo Securities Research estimates Source: Company data, KDB Daewoo Securities Research estimates

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April 25, 2013 SK Hynix

Figure 7. Annual EBITDA and EBITDA margin Figure 8. FCF (EBITDA - capex)
(Wtr) Annual EBITDA (L) (Wtr) EBITDA - capex
8 EBITDA margin (R) 60 8 EBITDA
Capex
6.4 50 6
6.1 6.0
6
5.3
40 4

4 3.6 30 2
3.0 3.0
20 0
2
10 -2
0.6

0 0 -4
08 09 10 11 12 13F 14F 15F 06 07 08 09 10 11 12 13F 14F 15F

Source: Company data, KDB Daewoo Securities Research estimates Source: Company data, KDB Daewoo Securities Research estimates

Figure 9. Annual DRAM bit growth and ASP growth Figure 10. Annual NAND bit growth and ASP growth
(%) DRAM bit growth (YoY) (%) NAND bit growth (YoY)
80 ASP growth (YoY) 160 ASP growth (YoY)

51.3 50.8 113.5

120
38.1 93.8
40 34.1
30.0
80
55.0
23.7 46.7 43.9
0 40

-4.8
-18.0 0
-40 -5.4
-36.2 -40.8
-40 -20.0
-47.3 -29.9
-44.4
-80 -80
10 11 12 13F 14F 10 11 12 13F 14F

Source: Company data, KDB Daewoo Securities Research estimates Source: Company data, KDB Daewoo Securities Research estimates

Figure 11. 2Gb PC DRAM price trend and outlook Figure 12. 64Gb NAND MLC price trend and outlook
(US$) DDR3 2Gb spot price (US$) NAND 64Gb MLC spot price
3.0 DDR3 2Gb contract price KDB Daewoo forecasts KDB Daewoo forecasts
16 NAND 64Gb MLC contract price
Quarterly avg. contract price Quarterly avg. contract price
14
2.5
12
2.0
10

1.5 8

6
1.0
4
0.5 Elpida bankruptcy Expansion of mobile DRAM proportion
2 SEC: Reduced capacity
for major memory players
Toshiba: Reduced capacity (30%)
0.0 0
1/11 7/11 1/12 7/12 1/13 7/13F
7/13 1/14F
1/14 11.1 11.7 12.1 12.7 13.1 13.7
13.7F 14.1
14.1F

Source: DRAMeXchange, KDB Daewoo Securities Research estimates Source: DRAMeXchange, KDB Daewoo Securities Research estimates

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April 25, 2013 SK Hynix

SK Hynix (000660 KS/Buy/TP: W38,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized)

(Wbn) 12/12 12/13F 12/14F 12/15F (Wbn) 12/12 12/13F 12/14F 12/15F
Revenue 10,162 12,828 14,280 14,626 Current Assets 5,314 6,600 8,148 8,770
Cost of Sales 8,551 8,828 9,469 10,238 Cash and Cash Equivalents 658 1,567 2,491 3,150
Gross Profit 1,611 4,000 4,812 4,388 AR & Other Receivables 1,832 2,106 2,431 2,344
SG&A Expenses 1,839 1,846 2,000 2,100 Inventories 1,509 1,579 1,856 1,901
Operating Profit (Adj) -227 2,154 2,812 2,288 Other Current Assets 186 220 242 247
Operating Profit -227 2,154 2,812 2,288 Non-Current Assets 13,335 13,830 13,913 14,338
Non-Operating Profit 28 -214 -135 -97 Investments in Associates 104 104 104 104
Net Financial Income 238 248 200 132 Property, Plant and Equipment 11,586 11,968 11,967 12,346
Net Gain from Inv in Associates 17 0 0 0 Intangible Assets 984 1,056 1,105 1,143
Pretax Profit -199 1,940 2,676 2,190 Total Assets 18,649 20,430 22,061 23,108
Income Tax -41 205 289 262 Current Liabilities 4,441 4,681 4,483 4,238
Profit from Continuing Operations -159 1,734 2,387 1,929 AP & Other Payables 1,335 1,579 1,728 1,770
Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 2,736 2,636 2,236 1,936
Net Profit -159 1,734 2,387 1,929 Other Current Liabilities 370 466 519 531
Controlling Interests -159 1,734 2,387 1,929 Non-Current Liabilities 4,468 4,580 4,432 4,205
Non-Controlling Interests 0 0 0 0 Long-Term Financial Liabilities 3,754 3,454 3,054 2,554
Total Comprehensive Profit -464 1,429 2,082 1,623 Other Non-Current Liabilities 139 434 686 959
Controlling Interests -464 1,429 2,079 1,620 Total Liabilities 8,909 9,261 8,915 8,443
Non-Controlling Interests 0 0 3 3 Controlling Interests 9,740 11,169 13,144 14,659
EBITDA 2,976 5,258 6,421 6,028 Capital Stock 3,488 3,488 3,488 3,488
FCF (Free Cash Flow) -1,655 1,403 2,013 1,684 Capital Surplus 3,054 3,054 3,054 3,054
EBITDA Margin (%) 29.3 41.0 45.0 41.2 Retained Earnings 3,313 5,048 7,331 9,155
Operating Profit Margin (%) -2.2 16.8 19.7 15.6 Non-Controlling Interests -1 -1 2 5
Net Profit Margin (%) -1.6 13.5 16.7 13.2 Stockholders' Equity 9,739 11,168 13,146 14,665

Cash Flows (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/12 12/13F 12/14F 12/15F 12/12 12/13F 12/14F 12/15F
Cash Flows from Op Activities 2,393 5,103 5,685 5,853 P/E (x) - 11.7 8.5 10.5
Net Profit -199 1,734 2,387 1,929 P/CF (x) 5.8 4.2 3.4 3.6
Non-Cash Income and Expense 3,382 3,524 4,034 4,099 P/B (x) 2.0 2.0 1.7 1.5
Depreciation 3,058 3,019 3,501 3,621 EV/EBITDA (x) 7.8 4.6 3.5 3.5
Amortization 146 86 108 119 EPS (W) -233 2,498 3,439 2,778
Others -144 -1 -1 -1 CFPS (W) 4,467 6,971 8,638 8,166
Chg in Working Capital -762 50 -447 87 BPS (W) 12,615 14,570 17,343 19,471
Chg in AR & Other Receivables -322 -274 -326 88 DPS (W) 0 150 150 150
Chg in Inventories -336 -70 -277 -45 Payout ratio (%) 0.0 6.0 4.4 5.4
Chg in AP & Other Payables 0 244 149 42 Dividend Yield (%) 0.0 0.5 0.5 0.5
Income Tax Paid -28 -205 -289 -262 Revenue Growth (%) -2.3 26.2 11.3 2.4
Cash Flows from Inv Activities -4,604 -3,498 -3,570 -4,040 EBITDA Growth (%) -22.4 76.7 22.1 -6.1
Chg in PP&E -3,737 -3,400 -3,500 -4,000 Operating Profit Growth (%) TTR TTB 30.6 -18.6
Chg in Intangible Assets -158 -158 -158 -158 EPS Growth (%) RR TTB 37.7 -19.2
Chg in Financial Assets -490 0 0 0 Accounts Receivable Turnover (x) 6.2 7.0 6.7 6.5
Others -220 60 88 118 Inventory Turnover (x) 7.6 8.3 8.3 7.8
Cash Flows from Fin Activities 1,642 -696 -1,192 -1,154 Accounts Payable Turnover (x) 10.3 12.8 13.0 12.7
Chg in Financial Liabilities -412 -400 -800 -800 ROA (%) -0.9 8.9 11.2 8.5
Chg in Equity 2,329 0 0 0 ROE (%) -1.8 16.6 19.6 13.9
Dividends Paid 0 0 -104 -104 ROIC (%) -1.7 13.0 16.4 12.8
Others -275 -296 -288 -250 Liability to Equity Ratio (%) 91.5 82.9 67.8 57.6
Increase (Decrease) in Cash -585 909 923 659 Current Ratio (%) 119.6 141.0 181.7 207.0
Beginning Balance 1,244 658 1,567 2,491 Net Debt to Equity Ratio (%) 48.3 30.4 12.7 1.5
Ending Balance 658 1,567 2,491 3,150 Interest Coverage Ratio (x) -0.7 7.0 9.8 9.1
Source: Company data, KDB Daewoo Securities Research estimates

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April 25, 2013 SK Hynix

Important Disclosures & Disclaimers

Disclosures
(W) SK Hynix
As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for equity-linked 50,000
warrants backed by shares of SK Hynix as an underlying asset, and other than this, Daewoo Securities has
no other special interests in the covered companies. 40,000

As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for the shares of 30,000
SK Hynix, and other than this, Daewoo Securities has no other special interests in the covered companies.
20,000
As of the publication date, Daewoo Securities Co., Ltd. issued equity-linked warrants with SK Hynix as an
underlying asset, and other than this, Daewoo Securities has no other special interests in the covered 10,000
companies.
0
4/11 10/11 4/12 10/12 4/13

Stock Ratings Industry Ratings

Buy Relative performance of 20% or greater Overweight Fundamentals are favorable or improving
Trading Buy Relative performance of 10% or greater, but with volatility Neutral Fundamentals are steady without any material changes
Hold Relative performance of -10% and 10% Underweight Fundamentals are unfavorable or worsening
Sell Relative performance of -10%
* Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material
development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.

Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions
expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this
report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s
area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified
herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been
promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by
overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and
private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of
the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein.

Disclaimers
This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been
independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or
correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English
translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this
report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This
report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any
securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of
the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any
laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or
form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers,
employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a
purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or
agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment
banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to
in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to
future performance. Future returns are not guaranteed, and a loss of original capital may occur.

KDB Daewoo Securities Research 8

April 25, 2013 SK Hynix

Distribution
United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other
persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant
Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its
contents.
United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional
investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance
thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that
they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed
herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The
securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or
sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements.
Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong
Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for
distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws
of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person.
All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or
its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its
affiliates to any registration or licensing requirement within such jurisdiction.

KDB Daewoo Securities International Network

Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc.
Head Office Two International Finance Centre 600 Lexington Avenue
34-3 Yeouido-dong, Yeongdeungpo-gu Suites 2005-2012 Suite 301
Seoul 150-716 8 Finance Street, Central New York, NY 10022
Korea Hong Kong United States
Tel: 82-2-768-3026 Tel: 85-2-2514-1304 Tel: 1-212-407-1022

Daewoo Securities (Europe) Ltd. Tokyo Representative Office Beijing Representative Office
Tower 42, Level 41 7th Floor, Yusen Building Suite 2602, Twin Towers (East)
25 Old Broad Street 2-3-2 Marunouchi, Chiyoda-ku B-12 Jianguomenwai Avenue
London EC2N 1HQ Tokyo 100-0005 Chaoyang District, Beijing 100022
United Kingdom Japan China
Tel: 44-20-7982-8016 Tel: 81-3- 3211-5511 Tel: 86-10-6567-9699

Shanghai Representative Office Ho Chi Minh Representative Office

Unit 13, 28th Floor, Hang Seng Bank Tower Centec Tower
1000 Lujiazui Ring Road 72-74 Nguyen Thi Minh Khai Street
Pudong New Area, Shanghai 200120 Ward 6, District 3, Ho Chi Minh City
China Vietnam
Tel: 86-21-5013-6392 Tel: 84-8-3910-6000

KDB Daewoo Securities Research 9