Disclaimer: This article is for informational purposes only and does not constitute financial advice.
📌 Key Research Highlights
- Broker: SK Securities | Investment Rating: Buy (Maintained)
- Target Price: 4,000,000 KRW (~$3,001 USD based on 1333 KRW/USD) (Maintained)
- Core Thesis: 3Q26 operating profit is expected to beat market consensus due to strong pricing power in DRAM and NAND, despite downward adjustments in exchange rate assumptions.
- Valuation: Significant undervaluation with a 2027E P/E of 3.7x and a robust shareholder return policy based on Free Cash Flow (FCF).
Investment Thesis and Target Price
SK Securities maintains a Buy rating and a Target Price of 4,000,000 KRW (~$3,001 USD based on 1333 KRW/USD). The analyst argues that SK Hynix is severely undervalued, noting that the 2027E P/E ratio is only 3.7x despite the company possessing world-class profit generation capabilities. The valuation is further supported by a shareholder return policy targeting over 50% of cumulative FCF from 2026 to 2028, which is estimated to reach approximately 11% of the current market capitalization in 2027 and 14% in 2028.
Earnings Estimates and Financial Preview
3Q26 Preview: Operating profit is estimated at 79,074 billion KRW (~$59.3B USD), representing a 31% increase Quarter-over-Quarter (QoQ). This figure exceeds the market consensus of 74 trillion KRW by approximately 7%. This growth is driven by strong pricing momentum: DRAM prices increased by 26% and NAND by 16% QoQ, while shipments rose by 9% for DRAM and 2% for NAND.
Long-term Forecasts:
- 2027 Operating Profit: Forecasted at 434,786 billion KRW (~$326.2B USD), a 61% increase Year-over-Year (YoY). This estimate was slightly revised upward despite a 7% reduction in the KRW/USD exchange rate assumption (from 1,440 to 1,340 KRW/USD).
- 2027 Revenue: Estimated at 539,126 billion KRW (~$404.4B USD).
- 2028 Operating Profit: Estimated at 555,567 billion KRW (~$416.8B USD).
- 2028 Revenue: Estimated at 723,939 billion KRW (~$543.1B USD).
Key Semiconductor Drivers and Catalysts
The analyst identifies several critical drivers sustaining the memory cycle:
- AI Memory Demand: Intensifying supply shortages amid strong AI demand and the “Dual Market” effect driven by Long-Term Agreements (LTAs) are bolstering commodity prices.
- HBM Momentum: A strong outlook for High Bandwidth Memory (HBM) in 2027, with expected price increases of 84% YoY and strong shipment growth.
- Product Pricing: Significant premiums in the spot market for DDR5 RDIMM (64GB at 115%, 32GB at 150%) indicate continued upward momentum.
- Structural Shift: The transition toward LTAs is improving the quality and visibility of demand, extending the duration of the profit cycle beyond simple price peaks.
🔗 Original Source: View the official filing/article here.