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Adoption of long-term supply agreements accelerates

Long-term supply agreements move into full swing

We maintain our target price of W3,800,000 for SK Hynix. We raised our 2Q26 and 2026 operating profit forecasts by 4.8% and 3.2%, respectively, but left our target price unchanged given the substantial upside from current levels. Valuation is not a concern, with the stock currently trading at a 2026F P/B of 3.8x and P/E of 5.8x, well below the peer averages (7.6x and 12.4x, respectively).

Recently, growth in big tech companies’ data center order backlogs has been outpacing the increase in their capex. Against this backdrop, long-term memory supply agreements aimed at ensuring stable capex execution are gaining traction. Sandisk recently secured a US$42bn order backlog through three long-term agreements (with prepayments totaling US$11bn), while Kioxia aims to have long-term agreements cover 50% of volume by 2028.

For HBM, we expect meaningful demand growth and customer diversification in 2027. Google’s new TPU lineup adopts 30% higher HBM3E capacity for inference (8i) than for training (8t). Amazon’s custom chip business (Trainium) saw an annualized revenue run rate of over US$20bn as of 1Q26, and its Trainium3 (144GB of HBM3E) and Trainium4 (estimate: 288GB of HBM4) have secured commitments worth US$225bn.

Nvidia’s Rubin platform (featuring 288GB of HBM4) is set for a commercial rollout in 2H26, followed by the Rubin Ultra platform (1TB of HBM4) in 2027, which should ensure sustained strength in HBM demand. At the same time, rising conventional memory prices are reducing the incentive for suppliers to divert capacity toward HBM production, making stable long-term supply increasingly important for customers.

Against this backdrop, SK Group recently disclosed that it entered into a multi-year supply agreement with Nvidia, likely covering memory (including HBM). SK Hynix is also believed to have signed long-term supply agreements with multiple big tech companies, with price floor/ceiling structures and prepayment ratios exceeding historical norms. We view this as the beginning of a new phase in the memory market where both suppliers and customers benefit from greater supply visibility.

We raise our DRAM ASP growth assumptions to +41% for 2Q26, +188% for 2026, and +19% for 2027 (vs. previous estimates of +37%, +184%, and +19%, respectively), while also lifting our NAND ASP growth projections to +55% for 2Q26, +250% for 2026, and +28% for 2027 (vs. previous estimates of +45%, +231%, and +27%, respectively). Accordingly, we lift our 2Q26 and 2026 operating profit forecasts to W71tr and W299tr, respectively (vs. previous estimates of W68tr and W290tr, respectively).

Meanwhile, SK Hynix has submitted a filing to the US Securities and Exchange Commission for a potential ADR listing in 2026. We believe an ADR listing could serve as an additional catalyst for the shares, particularly if it ultimately leads to inclusion in the PHLX Semiconductor Sector Index.