Citi maintains Buy on SK Hynix and raises target price to W3,100,000

Overview

This is a Citi company research and rating revision report on SK Hynix. Its core view is that AI inference and large-model token demand expansion are lifting demand for high-end memory procurement, and with supply constraints in place, HBM, server DDR5, SoCAMM2, and SSD prices may rise further, materially increasing SK Hynix’s 2026 and 2027 earnings outlook.

Core views

The report maintains SK Hynix at Buy and raises the target price to W3,100,000. Citi expects 2026E server DDR5 DRAM ASP to grow 329% year-over-year and SSD ASP to grow 267% year-over-year; global DRAM ASP to grow 200% year-over-year, and global NAND ASP to grow 186% year-over-year. On the new DRAM/NAND ASP assumptions, Citi raised the 2026E/2027E operating profit forecasts to W251 trillion/W347 trillion.

Analysis framework

The analytical framework focuses on memory price cycles, AI-related demand, product mix upgrade, and segment valuation. The report first raises ASP forecasts for HBM, server DDR5, SSD, DRAM, and NAND, then transmits the pricing assumptions through to revenue, margin, EBITDA, and EPS forecasts, and finally applies SOTP to value the HBM and commodity memory segments separately.

Methodology notes

• Valuation methodSOTP

  Sum of the parts valuation

  The report splits SK Hynix’s operating business into HBM and commodity memory/other operations to reflect the transition of next-generation memory markets from traditional commodity cycles to more customized, customer-specific structures.

• Valuation multipleEV/EBITDA

  Target price derived from 2026E EBITDA

  The report values the company based on 2026E EBITDA, applies a higher multiple for HBM versus global peers using TSMC as reference, and uses historical average forward EV/EBITDA multiples for the early phase of a memory upcycle for the commodity memory business.

• Industry forecastingASP forecast

  Profitability forecasting driven by average selling price changes

  The report uplifts ASP forecasts for HBM, server DDR5, SSD, DRAM, and NAND, then derives improvements in revenue, gross margin, EBIT, and net income from those price assumptions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SK Hynix(000660.KS)

  Company under coverage

  Strengths

  HBM leadership, AI inference-driven server DDR5 and SSD pricing upside, and significant 2026E margin and EPS expansion.

  Weaknesses

  The 12-month forward P/B has risen to around 3.3x, above the long-term average of 1.4x; the stock price has already risen quickly.

  Comparison

  The report uses TSMC as an HBM valuation reference and views the high-end memory market as moving closer to a foundry-style model with customization and customer stickiness.

  Risks

  DRAM demand downtick, NAND demand below expectations, weak global consumption.

• TSMC

  Valuation peer and related disclosure company

  Strengths

  Advanced process leadership and AI demand growth potential support a higher valuation.

  Weaknesses

  May be affected by rising depreciation costs, a stronger New Taiwan dollar, and macro slowdown.

  Comparison

  Citi uses TSMC as an HBM valuation reference, arguing that high-end memory is increasingly moving toward a custom, customer-locked foundry-like model.

  Risks

  Global semiconductor market weakness, entry of competitors into foundry services, longer-than-expected inventory absorption, and tariff or trade disruptions that slow demand.

Key data

• Target priceW3,100,000Previous target price was W1,700,000.
• RatingBuyThe report explicitly keeps a Buy rating.
• Reference priceW1,686,000The scenario chart shows the date as May 8, 2026.
• Expected total return83.9%Includes roughly 83.9% expected price return and 0.1% dividend yield.
• 2026E operating profitW251 trillionThe report raised the 2026E OP forecast by 8%.
• 2027E operating profitW347 trillionThe report raised the 2027E OP forecast by 16%.
• 2026E server DDR5 ASP growth+329% YoYPrevious forecast was +308% YoY.
• 2026E SSD ASP growth+267% YoYPrevious forecast was +242% YoY.
• 2026E global DRAM ASP growth+200% YoYPrevious forecast was +190% YoY.
• 2026E global NAND ASP growth+186% YoYPrevious forecast was +172% YoY.
• 2026E net profitW204,189bnThe table discloses 2026E reported net profit.
• 2026E EPSW280,478The table discloses 2026E diluted/reported EPS.

Impact & implications

If the report’s assumptions materialize, SK Hynix’s earnings leverage would mainly come from tightening supply-demand for AI-related high-end memory and higher pricing, rather than a simple recovery of the traditional DRAM/NAND cycle. The sharply raised target price suggests Citi believes HBM deserves a higher valuation and that the commodity memory business is still in the early phase of an upcycle.

Risks

• A downtick in DRAM demand, weakening pricing and earnings assumptions.
• NAND demand below Citi’s forecast, which would impair the upward ASP case for SSD and NAND.
• Weak global consumption may drag down end demand.
• An unexpected end to the memory upcycle or potential DRAM market-share loss may compress valuation.
• If AI inference and token demand growth falls short of expectations, there is downside risk to pricing assumptions for server DDR5, HBM, and SSD.

What to watch

• Whether HBM4 product mix expansion and HBM3e demand continue to beat expectations.
• Actual 2026 second-half price movements for HBM, server DDR5, and SoCAMM2.
• Whether AI inference demand and large-model token constraints keep pushing high-end memory procurement.
• Whether global DRAM/NAND supply constraints persist and whether quarterly sequential ASP gains can match forecasts.
• The gap between SK Hynix’s actual 2026E operating profit, EBITDA, and EPS and Citi’s raised forecast after this revision.