Two lines, two different magnitudes
SK hynix reported second-quarter revenue of 79,318.7 billion won, operating profit of 60,542.6 billion won and net income of 93,922.6 billion won. The operating margin was reported at 76 percent and the net margin at 118 percent. When a company's net income exceeds its revenue, the difference comes by definition from a non-operating line; here that difference is about 33.4 trillion won.[1]
The release does not name that line. There are several candidates: valuation gains on holdings, income from equity-accounted affiliates, foreign-exchange effects or the recognition of a deferred tax asset. Without knowing which, a 118 percent net margin cannot be carried from one period into the next.[1]
The line that can be inspected
The operating line, by contrast, is disclosed and comparable. Revenue rose 257 percent from 22,232 billion won a year earlier and operating profit 557 percent from 9,212.9 billion won. Sequentially, revenue rose 51 percent from 52,576.3 billion won and operating profit 61 percent from 37,610.3 billion won. Operating profit growing faster than revenue indicates that the gain came from price and product mix rather than from volume.[1]
On the cash side, only what the release provides can be said. Cash and equivalents rose 33.6 trillion won over the quarter to 88 trillion won and the net cash position to 69.4 trillion won, while total debt fell 0.7 trillion won to 18.6 trillion won. With operating profit at 60,542.6 billion won, a cash balance rising by about half that amount is unremarkable; saying how much of the difference went into capital expenditure requires the cash flow statement, which this release does not carry.[1]
The line to look for in the next filing
The company also said it had signed long-term agreements with around 10 customers, that mass shipments of HBM4 had begun, and that it aims to bring 321-layer NAND products to about 50 percent of domestic capacity by year end. These are concrete statements about capacity and customer commitment, yet none of them contains contract volume, unit price or a payment schedule, so none can be entered into a revenue model.[1]
Three days ago in this column I wrote that the 500 billion dollar initiative between Nvidia and SK Group could not count as a model input until a binding supply contract was signed and the capacity investment was broken out in the financial statements. This quarterly release delivers neither: it speaks of long-term agreements while giving no volume and no price. The line to look for is non-operating income in the third-quarter financial report. If the difference of about 33.4 trillion won turns out to be concentrated in a non-recurring valuation gain, the 118 percent net margin will not carry into the next quarter.[1], [2]