Maintain a Buy rating on SK Hynix as another surprise in DRAM prices lifts the target price to KRW 2,900,000

Overview

This report is HSBC's company research and earnings outlook update on SK Hynix. The key conclusion is that DRAM price increases have once again exceeded expectations; strong general-purpose server demand is not only pushing up server DRAM prices, but is also making the mobile DRAM price upcycle more durable. At the same time, continued upward revisions to CSP capex, rising AI service costs, and improving data-center ROIC will support a longer memory upcycle.

Core views

HSBC maintains a Buy rating on SK Hynix and raises the target price from KRW 1,800,000 to KRW 2,900,000. The report raises 2026/2027/2028 operating profit forecasts by 13%/19%/21%, citing stronger-than-expected server and mobile DRAM price increases, the shift of PC capacity toward servers boosting PC DRAM prices, the rebound in HBM3e prices narrowing the discount versus PC DRAM, and continued CSP capex growth. On valuation, the report switches the reference period to the 2027-2028 average BVPS and raises the target P/B multiple from 2.4x to 2.8x.

Analysis framework

The report supports its investment conclusion using upgraded earnings forecasts, DRAM and NAND price curves, server shipments and per-unit content, CSP capex, historical DRAM upcycle comparisons, and a P/B valuation framework. Its focus is not the single-quarter result itself, but whether the storage upcycle driven jointly by AI inference, general-purpose servers, SO-CAMM2, HBM, and CSP investment can extend through 2028.

Methodology notes

• 盈利预测Operating profit and EPS forecast revisions

  Raise 2026-2028 operating profit and EPS forecasts

  The report incorporates stronger DRAM price assumptions into the model, raising 2026/2027/2028 operating profit forecasts by 13%/19%/21%, and showing that HSBC EPS forecasts for 2026-2028 are 11.8%/17.9%/19.7% above prior estimates.

• 估值PB valuation

  Raise the target P/B multiple to 2.8x

  The report switches the valuation reference period from 2027 to the 2027-2028 average BVPS, and raises the target P/B multiple from 2.4x to 2.8x because of improved ROE and better comparability with U.S.-listed peers.

• 行业周期DRAM supercycle comparison

  Compare the current cycle with the 1990-1995 DRAM shortage cycle

  The report views the current memory cycle as being in the middle stage of a six-year DRAM shortage cycle similar to 1990-1995 office automation, and expects AI inference and general-purpose server demand to drive a longer upcycle.

• 需求分析Server shipments and DRAM content

  General-purpose server growth and higher DRAM content per unit

  The report cites server shipment forecasts and per-server DRAM content to argue that server shipments will grow 20%/21% y/y in 2026/2027 and that server DRAM content per unit will remain at high growth in 2026-2027, thereby supporting server DRAM prices.

Asset mapping & comparison

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

• SK Hynix equity

  Covered name in the report, rated Buy

  Strengths

  DRAM prices are stronger than expected, with 2026-2028 earnings forecasts raised; HBM, server DRAM, mobile DRAM, and NAND all benefit from AI and CSP capex.

  Weaknesses

  Valuation and earnings are highly sensitive to the memory price cycle, CSP capex, and supply discipline.

  Comparison

  The report says that even at the target price, the implied P/E on 2027/2028 average EPS is still only about 7x; HSBC's 2027-2028 operating profit forecasts are 9%-13% above Bloomberg consensus.

  Risks

  Rising U.S. interest rates, aggressive capacity expansion by memory makers, and Middle East conflict could pressure valuation or demand.

• DRAM

  Core earnings driver

  Strengths

  Server and mobile DRAM price increases are strong, and the shift of PC capacity toward servers also supports PC DRAM prices.

  Weaknesses

  Price gains depend on sustained demand and supply discipline.

  Comparison

  The report compares the current memory cycle with the 1990-1995 DRAM supercycle.

  Risks

  If memory makers expand aggressively, the durability of DRAM price increases could weaken.

• HBM

  High-end memory business tied to AI servers

  Strengths

  HBM3e prices are rebounding, and platforms such as Rubin Ultra significantly increase HBM capacity demand.

  Weaknesses

  The report notes that part of Hynix's total DRAM revenue mix will shift as commodity DRAM prices rise.

  Comparison

  AI GPU HBM capacity increases significantly from GB200 to GB300 and the Rubin Ultra stage.

  Risks

  The pace of AI investment or changes in GPU platforms could affect demand realization.

• NAND

  Related business driven by ICMS and eSSD demand

  Strengths

  NAND TLC wafer prices are projected to keep rising from 3Q25 to 2Q27e, supported by ICMS and eSSD demand.

  Weaknesses

  Compared with DRAM, NAND carries a lower weight in the report's investment thesis.

  Comparison

  NAND opportunities come more from the Vera Rubin platform, ICMS, and eSSD than from traditional consumer demand.

  Risks

  If AI-related storage architecture or eSSD demand falls short of expectations, price recovery could slow.

Key data

• Target priceKRW 2,900,000Previous target price was KRW 1,800,000.
• Share price and upsideKRW 1,880,000；+54.3%Share price and upside versus target price disclosed in the table.
• 2Q operating profit forecastKRW 65万亿Up 606% y/y and 73% q/q; revenue forecast KRW 80 trillion.
• 2026 operating profit forecastKRW 265万亿Up 460% y/y, and raised 13% from the previous forecast.
• 2026 revenue forecastKRW 329万亿Up 238% y/y.
• DRAM ASP assumption+40% q-o-qHigher than the previous assumption of +28%.
• 2026 capex for the top four CSPsUSD 640bn；+70% y-o-yHigher than the pre-1Q results growth assumption of about +60%.
• Consensus 2026 capex for major global CSPsUSD 733bn；+80% y-o-yIncluding major CSPs in the U.S. and China; further upward revisions.
• HSBC EPS 2026e/2027e/2028e287,363.28 / 421,806.97 / 443,537.44HSBC diluted EPS forecasts disclosed in the table.
• PE 2026e/2027e/2028e6.5x / 4.5x / 4.2xValuation metrics based on the report table.

Impact & implications

If the report's view is correct, SK Hynix's earnings revisions will come not only from HBM, but also from broader memory price gains across server, mobile, PC DRAM, and NAND. Upward revisions to CSP capex and expanding general-purpose server demand suggest that the memory cycle may be longer and more stable, which could lead the market to assign a higher P/B valuation multiple. For investors, the main implication is that SK Hynix benefits in the AI infrastructure chain not only through high-end HBM, but also through a re-rating in general-purpose server and mobile memory prices.

Risks

• Rising U.S. interest rates could increase financing costs, especially when neo-CSPs and OpenAI pursue investment through leverage.
• Aggressive capacity expansion by memory makers could weaken the sustainability of DRAM and NAND price increases.
• Conflict in the Middle East could create macro, energy, or supply-chain uncertainty.
• If CSP capex does not continue to be revised up as expected, demand for servers and AI infrastructure could fall below the report's assumptions.
• The target price depends on a high P/B multiple and the sustainability of 2027-2028 earnings; if the market does not accept a longer cycle, the room for valuation re-rating may be limited.

What to watch

• Whether 2Q DRAM ASP reaches the report's assumed +40% q/q increase.
• The persistence of server DRAM, mobile DRAM, and PC DRAM contract prices in the second half of 2026.
• Whether 2026 capex for major U.S. and Chinese CSPs continues to be revised up.
• The progress of storage demand related to SO-CAMM2, ICMS, eSSD, and the Vera Rubin platform.
• Whether the gap between SK Hynix's 2026-2028 operating profit and Bloomberg consensus narrows.
• The progress of the company ADR listing and its impact on comparable valuation multiples.
• New capacity additions in the memory industry and the pace of competitors' expansion.