South Korea NH Investment & Securities: Maintains SK Hynix "Buy" Rating, Lowers Target Price to 3.4 Million Korean Won

TechFlow news, July 30, South Korea NH Investment & Securities: We maintain our "Buy" rating on SK Hynix, but have lowered its target price from 4.1 million won to 3.4 million won. Considering the shipment schedule for HBM4 and the faster-than-expected adoption of Long-Term Agreements (LTA), we have taken a prudent stance and slightly lowered our earnings forecasts for 2027 to 2028. Nevertheless, our focus remains on the sustainable supply-demand profitability levels brought about by the implementation of LTA, rather than the industry downcycle. Currently, the market remains highly skeptical about the effectiveness of long-term agreements, so time is still needed for verification. Once the effect of long-term agreements is confirmed by the market, it is expected to drive a re-rating of the company's valuation. At the same time, although the company's cash generation capability has significantly strengthened, the lack of a clear shareholder return framework is still disappointing. If the company can clarify capital allocation guidance, it will become an important catalyst for driving stock price increases. Given that the company's fundamentals remain robust, we believe the recent stock price correction has been too large.

SK Hynix achieved sales of 79.3 trillion won in the second quarter of 2026, a year-on-year increase of 256.8% and a quarter-on-quarter increase of 50.9%; operating profit was 60.5 trillion won, a year-on-year increase of 557.2% and a quarter-on-quarter increase of 61.0%. Due to product structure adjustments and the beginning implementation of long-term agreements, the company's performance was slightly below market expectations. Looking ahead to the third quarter of 2026, with the acceleration of HBM4 shipments, bit shipments (Bit Growth) for DRAM and NAND are expected to increase by 10.0% and 1.3% quarter-on-quarter respectively, and the composite average selling price is expected to rise by 16.5% and 7.0% quarter-on-quarter respectively. SK Hynix's operating profit for the third quarter of 2026 is expected to reach 76.2 trillion won, a year-on-year increase of 569.6% and a quarter-on-quarter increase of 25.9%. (Jin10)