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Reflecting additional NAND momentum

Revising up earnings forecasts on stronger NAND pricing

We raise our target price for SK Hynix to W3,200,000 (from W2,700,000), applying the global pure-play memory sector average P/B of 5.3x (vs. 4.5x previously) to our 12-month forward BPS. Supported by structurally higher memory pricing and increased long-term supply agreements, we project the firm’s average 2026-28 ROE to reach 66% (vs. 19% over the past decade), justifying the application of the sector average P/B.

We revised up our operating profit forecasts to W67.4tr for 2Q26, W290tr for 2026, and W420tr for 2027 (vs. previous estimates of W65.3tr, W282tr, and W403tr, respectively). We raised our NAND ASP growth assumptions to +45% for 2Q26, +232% for 2026, and +27% for 2027 (vs. previous estimates of +30%, +201%, and +25%, respectively), while also lifting our 2027 HBM ASP growth projection to +25.3% (from +19.7% previously). Our bit growth assumptions remain unchanged.

Robust enterprise SSD demand

As NAND layer counts exceed 232 layers, there are concerns that higher resistance-capacitance (RC) delay could reduce reliability, limiting scalability for high-performance AI applications. While technologies such as CMOS bonded array (CBA) should help address this challenge over time, the near-term surge in AI-related demand will likely have to be met primarily through an increase in SSD volumes.

Recent TrendForce forecasts also point to enterprise SSD bit growth being increasingly driven by unit growth rather than higher per-unit capacity. Indeed, the forecast for 2026 enterprise SSD bit growth was recently raised to 76.9% (+6.7%p MoM), with unit growth revised up to 41.5% (+2.4%p MoM), marking the third straight monthly upward revision.

Kioxia’s outlook signals strong earnings and share price momentum

In its guidance, Kioxia projected NAND ASPs to remain strong in 2Q26, rising by more than 40%. The company also indicated that NAND undersupply is likely to continue through 2027, while signaling a disciplined supply stance. For 2Q26, both Kioxia and SanDisk guided OP margins in the 70% range, and we believe SK Hynix’s NAND business could also reach a similar level of profitability.

Kioxia also noted that inventory levels increased as it moved to secure safety stock of DRAM for SSD production, highlighting the growing importance of DRAM procurement stability. In this respect, SK Hynix holds an advantage as a full-stack manufacturer. Separately, Kioxia disclosed that it is considering an ADR issuance, and its stock fully recovered from its post-earnings decline shortly after the announcement. We believe this illustrates the market’s positive response to the prospect of improved liquidity and incremental investor inflows from a potential ADR listing.