Author: Rita
SK Hynix's stock price fell 15% last week, underperforming the KOSPI (-5%) and Samsung Electronics (-9%). Market concerns centered on three issues: uncertainty regarding HBM specifications and pricing, an unclear shareholder returns timetable, and the disclosure of a 54 trillion won infrastructure capital expenditure plan. In its research report dated August 9, JPMorgan addressed these concerns one by one. JP Morgan noted that media reports of a 50% discount on HBM pricing are inaccurate, and the company will announce a new shareholder returns plan by the end of September at the latest. While the 54 trillion won capex plan is substantial, it is an early preparation of factory space to meet the 2030 target of one million wafer production capacity. JP Morgan maintains its Overweight rating with a target price of 2.75 million won.
HBM Pricing Discount Reports Misread
The market's greatest worry is HBM4 pricing. Some media reported that SK Hynix's HBM4 pricing for 2027 might be 50% lower than its competitors. JP Morgan explicitly stated this figure is inaccurate.
JP Morgan's conservative pricing assumption is that the average HBM price in 2027 will increase by less than 40% year-on-year, based on three logics. First, memory suppliers currently prefer to allocate LTA capacity to DDR5/LPDDR5/NAND, which also offer attractive profit margins. Second, NVIDIA is SK Hynix's largest customer, and their longstanding product partnership necessitates pricing considerations from a long-term procurement perspective. Third, HBM prices can be renegotiated annually, leaving room for adjustments in subsequent years. If SK Hynix successfully raises the average HBM price above JP Morgan's expectation, it would pose an upside risk to earnings per share estimates.
Shareholder Returns Plan to Land Before End of September
This is the most important near-term catalyst. SK Hynix clearly stated in an early August regulatory filing that it is actively studying additional shareholder returns measures, with an announcement expected before the end of the third quarter. This timeline is earlier than the "by year-end" timeframe mentioned by management during the Q2 earnings call.
JP Morgan believes the market would welcome a progressive shareholder returns policy. SK Hynix's cumulative free cash flow over the next three years is expected to exceed 800 trillion won, and with additional cash from the recent sale of its Kioxia stake, the company's cash flow generation capability far exceeds that of its peers. JP Morgan points out that many investors had originally expected SK Hynix's shareholder returns commitment to be more substantial than that of Japanese and US memory competitors.
54 Trillion Won Capex Paves the Way for 2030 Capacity
SK Hynix announced a 54 trillion won (approximately $381 billion) capital expenditure plan last week to build two new memory chip fabrication plants. Of this, 35.2 trillion won is for the Y2 DRAM plant in the Yongin Cluster (slightly above the 31 trillion won planned for Yongin Phase 1), and 19.1 trillion won is for the Cheongju M17 NAND plant.
JP Morgan believes this number, while appearing large, needs to be understood in a longer-term context. Yongin Y2 is the second of four planned clusters in Yongin, with construction expected to begin in July 2027, primarily for capacity expansion beyond 2031. Cheongju M17 construction will start in February 2027, with the first cleanroom targeted for completion by the end of 2028, and the investment period extending to April 2031. SK Hynix had previously set a target of reaching one million wafer production capacity by 2030. The disclosed capex plan aligns with this long-term roadmap and does not constitute aggressive short-term expansion.
Solidigm IPO's Strategic Value Limited
Regarding the IPO plan for SK Hynix's US subsidiary Solidigm, management stated it is still under evaluation and will be reconfirmed in a month. JP Morgan is cautious about the strategic value of an IPO. SK Hynix's primary motive for acquiring Solidigm from Intel in 2021 was to gain enterprise SSD solutions, a decision that has proven successful after a loss period in 2023. The NAND market has entered a super-cycle driven by AI, with profit margins exceeding 70%.
JP Morgan believes SK Hynix's current internal cash flow generation capability and balance sheet are sufficient to support capital expenditures without diluting existing shareholders. A Solidigm listing could also trigger restrictions under Korea's dual-listing rules. From the perspectives of broadening the investor base and valuation re-rating, the strategic significance of an IPO appears limited.
Last week's decline in SK Hynix's stock price was more an overreaction to short-term news flow. Reports of HBM pricing discounts were misread, the shareholder returns plan is landing ahead of schedule, and the 54 trillion won capex aligns with the 2030 capacity target rather than constituting aggressive short-term expansion. JP Morgan maintains its Overweight rating with a target price of 2.75 million won, implying a price-to-earnings multiple of approximately 7x based on average EPS for 2026-2027. The memory super-cycle continues, and SK Hynix's fundamentals remain unchanged.
Disclaimer
This article is a compilation and interpretation by Chaoxiang Research of a third-party brokerage research report (J.P. Morgan, August 9, 2026), combined with the organization of publicly available market information. The ratings, target prices, earnings forecasts, and related judgments cited in the article are the views of that brokerage's analysts, representing only the position of their affiliated institution. They do not represent the views of Chaoxiang Research and do not constitute any investment advice.
The market involves risks, and decisions should be made independently. This article should not be used as a basis for trading any securities.
