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Fair value reached

Raise TP to W300,000; downgrade to Hold

We raise our target price on SK Hynix to W300,000 (from W244,000) but downgrade our rating to Hold from Buy. We lifted our 2025 operating profit estimate by 9.8% to W38.2tr (from W34.8tr) but kept our target P/B unchanged at 1.7x. The stock has rallied following delays in a competitor’s supply of 12-layer HBM3E chips to a major customer. As a result, we believe it has reached its fair value more quickly than expected, with much of the anticipated earnings and valuation upside already priced in.

For 2026, we forecast operating profit at W45.9tr (+20.1% YoY) but expect ROE to decline to the low-30% range (from a 2025 peak of 37.6%). Although cash holdings are increasing, we see limited room for ROE-enhancing investments through 2026. Unless accompanied by further market share gains in HBM, further capex at this stage could come at the expense of profitability.

To support a further re-rating, we believe the company needs to either: 1) maintain its HBM market share following the introduction of HBM4E; or 2) implement additional shareholder return measures. In Nov. 2024, the company revised its dividend policy, shifting from a base dividend of W1,200 per share plus 5% of annual free cash flow to a base dividend of W1,500 per share along with up to 50% of cumulative three-year free cash flow. SK Hynix has also prioritized turning to a net cash position (which it is likely to achieve within the year), raising the possibility of additional shareholder returns.

2Q25 preview

For 2Q25, we expect SK Hynix to report revenue of W20.7tr (+17.4% QoQ) and operating profit of W9.1tr (+22.2% QoQ). We estimate DRAM shipment growth was in the mid-teens, exceeding the guidance (low-teen percentage increase) thanks to robust demand for high-capacity server DRAM and inventory restocking for some applications. We also estimate ASP rose 5.9% QoQ, driven by robust contract prices and an increased mix of 12-layer HBM3E chips.

We estimate that SK Hynix’s HBM market share reached 70% in 2Q25. For HBM4 (for which shipments are set to begin in 4Q25), we expect the company to secure an initial market share of over 80%, with its share in the overall HBM market remaining in the 60% range through 1H26. However, with competitors likely to ramp up shipments from 2H26, its full-year market share is likely to gradually decline to around 59%.