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Upgrade to Buy on faster-than-expected commodity memory rebound

Upgrade to Buy and raise TP to W520,000

We upgrade our rating on SK Hynix from Hold to Buy and raise our target price by 73% to W520,000 (from W300,000). We revised up our 2026 operating profit estimate by 31% to W59.8tr (from W45.9tr) while lifting our target P/B by 47% to 2.5x (from 1.7x).?We note that the rebound in the commodity chip market has been faster and more robust than we initially expected.

For 2026, we estimate the company’s DRAM bit growth at +18.7% and ASP growth at +12.3% (+32.6% for commodity DRAM and -8% for HBM). While we previously capped our target P/B at 1.7x in consideration of intensifying competition in HBM, we now believe that the strength in conventional memory prices could help limit HBM price declines. In light of this, we raise our target P/B to 2.5x, in line with Micron’s multiple.

2026 outlook: Limited supply and sustained demand

Since early October, server shipment forecasts for 2026 have seen successive upward revisions, reflecting the start of server installations following the completion of data centers in North America and China. Meanwhile, the outlook for smartphones and PCs remains sluggish, with shipment growth forecasts lowered to +0.4% YoY (-0.3%p vs. previous forecast), and +1.1% (-1.5%p), respectively.

Memory wafer capacity expansion has been limited due to soft demand for consumer IT devices. Additionally, the transition from HBM3E to HBM4 is estimated to result in a 30% increase in the DRAM conversion ratio (meaning greater cannibalization of commodity wafer capacity). In the storage segment, the HDD market, which is dominated by three suppliers, is experiencing tight supply due to limitations in producing high-capacity models (60TB+).

At present, contract prices for both DRAM and NAND are expected to rise by around 5% QoQ each quarter through 4Q26. That said, buyers are likely to concentrate on securing supply at favorable prices in the near term rather than focusing on the medium/long-term price outlook. Notably, some buyers are reportedly even accepting non-cancelable, non-returnable (NCNR) terms.

Looking ahead to 2H26, the key question is whether DRAM prices will stabilize. We see three major variables moving forward: 1) the potential for increased DRAM sourcing competition between the mobile and server segments due to the likely adoption of LPDDR5X SOCAMM in Nvidia’s Vera CPU; 2) rising demand for GDDR7 after the launch of Nvidia’s Rubin CPX; and 3) a potential recovery in consumer demand, driven by the end of Windows 10’s extended support period and the launch of foldable iPhones.