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Capacity fully booked

Raising 2026 earnings estimates and target multiple

We raise our target price for SK Hynix by 30.7% to W680,000 (from W520,000). We revised up our 2026 operating profit estimate by 4.5% to W62.6tr and our target P/B by 16% to 2.9x. Notably, reflecting the strong upward trend in memory contract prices, we have lifted our 4Q25 DRAM and NAND ASP growth assumptions by 4.1%p and 6.9%p, respectively. We expect prices to remain elevated through 2026.

Although our target P/B of 2.9x (based on the memory sector’s average 12-month forward multiple) exceeds SK Hynix’s historical valuation range, we believe this is justified given the company’s projected 2026 ROE of 38%, which is the highest in the industry. We also note that the company owns an approximately 40% stake in Kioxia, which currently garners a P/B of 4.2x―the highest among chipmakers.

Production capacity fully booked through 2026; further upside for HBM prices

For 4Q25, we expect SK Hynix to deliver record quarterly results, with revenue of W27.9tr (+14.1% QoQ) and operating profit of W13.6tr (+19.8% QoQ). The firm has indicated that it will keep DRAM and NAND bit growth (QoQ) at low-single-digit levels citing normalized inventory levels and signaling a continued focus on profitability. Meanwhile, we forecast DRAM and NAND ASPs to rise 8.4% and 11.2% QoQ, respectively, driving both top- and bottom-line growth.

In 2026, we forecast SK Hynix to continue solid growth, with revenue of W127.5tr (+37.9% YoY) and operating profit of W62.6tr (+49.4% YoY). The company projects that overall market bit demand growth will exceed 20% for DRAM and reach the high teens for NAND―both surpassing 2025 levels. Considering that virtually all production capacity is already spoken for through 2026 (giving the company strong visibility into demand conditions), these projections appear reliable.

For 2026, we estimate the company’s bit growth at 19.7% YoY for DRAM and 24.0% YoY for NAND, with blended ASP rising15.3% YoY for DRAM and 28.8% YoY for NAND. For HBM, our bit growth (+16.0% YoY) and ASP (-7.4% YoY) assumptions are somewhat conservative owing to the company’s already-high HBM market share, the ongoing transition from HBM3E to HBM4, and intensifying competition. That said, we see potential upside to ASP depending on the outcome of future pricing negotiations.

The company turned to a net cash position at end-3Q25. Based on our current forecasts, even with anticipated capex of W70tr and a fixed annual dividend of W1,500 per share in 2026?27, the company is likely to generate cumulative free cash flow of around W69tr over 2025?27. If it returns 50% to shareholders, the total return per share (including dividends) could reach approximately W50,000, implying a shareholder return yield of around 9% based on the current share price.