SK hynix target price raised to KRW 4,700,000, with AI memory demand remaining the core driver
AI summary card
SK hynix target price raised to KRW 4,700,000, with AI memory demand remaining the core driver
Although 2Q26 operating profit was below consensus, the report attributes the shortfall to shipment delays rather than deteriorating demand and expects DRAM price increases, HBM4 mass production, and tight supply to continue supporting upward earnings revisions.
- 2Q26 revenue was KRW 79.3 trillion and operating profit was KRW 60.5 trillion, with the operating margin reaching a quarterly high of 76%.
- 2Q26 operating profit was 6.4% below the KRW 64.7 trillion consensus, mainly because the DRAM price increase was below market expectations.
- The report expects 3Q26 DRAM prices to rise approximately 20% quarter over quarter, above the previous estimate of 10%.
- Annual operating profit forecasts for 2026 and 2027 were raised to KRW 270 trillion and KRW 418 trillion, respectively.
- The target price was raised 24% from the previous level to KRW 4,700,000, while the Buy rating and Overweight opinion were maintained.
Report interpretation
Overview
This is a company research report reviewing SK hynix's 2Q26 performance. The report notes that the company's 2Q26 operating profit was below market consensus, although its operating margin reached a quarterly high. The primary reason for the shortfall was a lower blended ASP caused by deferred shipments of high-value-added products, rather than weakening end demand. The analysts believe the company's earnings uptrend remains clear as DRAM prices continue to rise in 3Q26, HBM4 mass-production shipments begin, and investment in AI infrastructure continues.
Core views
The core view is that short-term earnings below consensus do not change the medium-term upward thesis. The report believes deferred shipments will become a factor supporting 3Q26 earnings improvement, while both DRAM bit growth and pricing are likely to outperform previous assumptions. At the same time, the transition to HBM and advanced processes will constrain effective supply expansion, further tightening supply and demand from the second half of 2026 through 2027. Although concerns about the sustainability of AI investment have caused the share price to decline, the report believes fundamentals are being demonstrated through earnings delivery.
Analysis framework
The report's analytical framework primarily consists of quarterly earnings review, business-segment profitability analysis, price and shipment assumptions, HBM/DRAM forecasts, PBR valuation, and target-price adjustment. For valuation, it uses 12-month forward BPS of KRW 779,636 and a target PBR of 6x to derive a target price of KRW 4,700,000.
Methodology notes
Target price based on 12MF BPS and target PBR multiple
The report applies a 6x target PBR to 12MF BPS of KRW 779,636 to derive a target price of KRW 4,700,000, while maintaining the Buy rating.
Price, shipment, and margin assumptions broken down by DRAM, NAND, and HBM
The report compares 2Q26 results with 1Q26, 2Q25, and consensus expectations, and further raises forecasts for 2026/2027 revenue, operating profit, EPS, and BPS.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- SK hynix (000660)Core covered company
- Strengths
- Strong profitability in DRAM, NAND, and HBM, with the 2Q26 operating margin reaching a high level; HBM4 mass-production shipments and AI infrastructure demand provide growth momentum.
- Weaknesses
- 2Q26 operating profit was below consensus, indicating that short-term pricing and shipment timing may still affect market expectations.
- Comparison
- Compared with market consensus, the report is more optimistic about 2026/2027 operating profit and has raised the target price.
- Risks
- Slower AI investment, memory price increases below expectations, changes in customer shipment schedules, and supply pressure caused by increased CapEx.
- DRAM businessPrimary earnings driver
- Strengths
- The report expects 3Q26 prices to rise by approximately 20%, while 2026 bit growth is expected to reach the mid-20% range.
- Weaknesses
- The 2Q26 price increase was below market expectations and was the main reason operating profit fell short of consensus.
- Comparison
- The report views DRAM performance as a key source of upward earnings revisions for 2026/2027.
- Risks
- ASP decline, failure of deferred shipments to materialize, and increased industry supply.
- HBM businessAI demand-related growth engine
- Strengths
- HBM4 mass-production shipments will ramp up from 3Q26, and the effect of price increases is expected to flow into earnings.
- Weaknesses
- Capacity expansion is constrained by TSV capacity and advanced-process conversion, and short-term delivery timing may affect revenue recognition.
- Comparison
- The report believes the transition to HBM and advanced processes will structurally limit supply growth, thereby supporting industry tightness.
- Risks
- AI server demand below expectations, changes in procurement schedules by major customers, and intensifying competition.
- NAND businessSupplementary business segment
- Strengths
- 2Q26 NAND operating margin was estimated at approximately 67%, showing significant year-over-year improvement.
- Weaknesses
- 2Q26 NAND revenue and operating profit were below the report's estimates.
- Comparison
- Compared with DRAM and HBM, NAND carries less strategic weight as a growth driver in the report.
- Risks
- NAND price volatility and a slower-than-expected demand recovery.
Key data
- 2Q26 revenueKRW 79.3 trillionUp 257% year over year and 51% quarter over quarter.
- 2Q26 operating profitKRW 60.5 trillionUp 557% year over year and 61% quarter over quarter, but 6.4% below the KRW 64.7 trillion consensus.
- 2Q26 operating margin76%Described by the report as a quarterly high; DRAM and NAND operating margins were estimated at 78% and 67%, respectively.
- 3Q26 DRAM price assumptionApproximately 20% quarter-over-quarter increaseAbove the report's previous estimate of approximately 10%.
- 2026 operating profit forecastKRW 270 trillionRaised by approximately 10% from the previous forecast.
- 2027 operating profit forecastKRW 418 trillionRaised by approximately 11% from the previous forecast.
- Target priceKRW 4,700,000Target price raised 24%, based on 12MF BPS of KRW 779,636 and a target PBR of 6x.
- Current share priceKRW 1,401,000The report's Stock Data lists the price as of 2026-07-29.
Impact & implications
For investment implications, the report believes the recent share-price decline primarily reflects market concerns about the sustainability of AI investment rather than deterioration in SK hynix's fundamentals. If AI infrastructure capital expenditure continues, customers continue to request shipments ahead of schedule, and the conversion to HBM and advanced processes continues to constrain supply, the company's earnings and valuation should remain supported on the upside.
Risks
- AI infrastructure investment is less sustainable than assumed in the report.
- DRAM or HBM price increases fall short of expectations.
- Deferred shipments of high-value-added products fail to materialize in subsequent quarters.
- Supply pressure from increased CapEx is greater than expected.
- Fluctuations in foreign exchange rates, non-operating gains and losses, and gains and losses related to investment assets affect net profit.
What to watch
- Whether the actual 3Q26 DRAM ASP increase approaches or exceeds 20%.
- The pace of HBM4 mass-production shipments and the strength of customer pull-ins.
- Whether 2026 DRAM bit growth reaches the mid-20% range.
- Whether AI hyperscaler capital expenditure remains elevated.
- Whether memory suppliers' and customers' safety-inventory levels remain low.
- Whether supply-demand tightness deepens as expected from the second half of 2026 through 2027.