Outstanding performance, record shareholder returns—will SK Hynix counterattack short sellers?
JPMorgan believes that SK Hynix's revenue and operating profit for the third quarter both reached record highs, exceeding market consensus by approximately 7% and 9% respectively. Its 100 trillion Korean won shareholder return plan is about 2.5 times the consensus. JPMorgan maintains its overweight rating with a target price of 2.7 million Korean won, expecting that the better-than-expected results combined with the return plan will shift market sentiment on the stock from negative to positive.
SK Hynix has delivered the strongest quarterly performance in its history and simultaneously announced a shareholder return program far exceeding market expectations, likely to turn previously bearish sentiment on the stock positive.
According to Fast Trading Desk, quoting a research report released by JPMorgan on the 28th, SK Hynix recorded revenue of KRW 104.6 trillion and operating profit of KRW 83.3 trillion in the third quarter of 2026, both reaching historic highs for the period, surpassing market consensus by about 7% and 9%, respectively, and exceeding JPMorgan’s own estimates by approximately 11% and 16%. On the same day, the company announced a shareholder return plan worth as much as KRW 100 trillion, including KRW 60 trillion in share buybacks and KRW 40 trillion in dividends. JPMorgan pointed out that the previous market consensus had been only about KRW 40 trillion.
JPMorgan analyst Jay Kwon stated in the report that the combination of better-than-expected quarterly performance and the new shareholder return program is expected to drive sentiment towards SK Hynix shares from previously bearish territory into more positive territory. The report maintains an Overweight rating on SK Hynix with a target price of KRW 2.7 million (based on the June 2027 timepoint), representing approximately double the current share price of KRW 1,343,000.
Pricing Strength, Smooth HBM4 Ramp-Up
The core driver behind the better-than-expected earnings this quarter was pricing. SK Hynix’s average selling price (ASP) for DRAM in the third quarter rose nearly 30% quarter-on-quarter, significantly above JPMorgan’s previous forecast of about 20%; NAND ASP rose around 25% quarter-on-quarter, also well above the 12% predicted by JPMorgan.
JPMorgan believes the outperformance in DRAM ASP signals that HBM4’s mass production ramp is progressing smoothly. The company expects HBM4 will surpass HBM3E in terms of HBM shipment volume and revenue share in the fourth quarter, and plans to bring the M15X production line to full capacity by the end of 2026. The company also revealed that 2027 HBM price negotiations are basically complete, and the profit premium of HBM over traditional DRAM is expected to narrow noticeably.
In terms of shipment volumes, third-quarter DRAM bit shipments grew approximately 10% quarter-on-quarter, meeting JPMorgan’s expectations; NAND bit shipments fell slightly, underperforming the expected 3% quarter-on-quarter growth. Forex factors provided some drag, with exchange losses reaching KRW 11.6 trillion in the quarter.
Q4 Shipment Guidance Far Exceeds Expectations
The company’s shipment guidance for the fourth quarter is considerably higher than market expectations. Management estimates that DRAM bit shipments will grow by around 20% quarter-on-quarter, well above JPMorgan’s forecast of 4%; NAND bit shipments are also expected to achieve mid-single-digit percentage growth quarter-on-quarter, exceeding JPMorgan’s 3% prediction.
The company attributes this growth to the expansion of 1cnm process node capacity, M15X ramp-up, and increased eSSD sales based on the 321-layer stacking architecture. The share of 321-layer NAND in domestic capacity is expected to exceed 50% in the fourth quarter.
In terms of technology roadmap, the company plans to increase the proportion of 1cnm process server products and expand sales of 1cnm DDR5 and LPDDR5 SOCAMM.
KRW 100 Trillion Buyback Plan Far Exceeds Consensus, Long-term Agreements Lock in Next Two Years’ Demand
The shareholder return plan is another major highlight of this announcement. SK Hynix announced a total shareholder return program of KRW 100 trillion for 2026, including KRW 60 trillion in share buybacks and KRW 40 trillion in dividends. According to JPMorgan, this corresponds to a payout ratio of over 65% of free cash flow in 2026.
JPMorgan states that market consensus for this plan had previously been about KRW 40 trillion—the size actually announced is around 2.5 times that. On the same day, the company announced a KRW 20 trillion buyback program, with KRW 10 trillion allocated for shareholder returns and another KRW 10 trillion for employee stock ownership plan (PSU) purchases. The third-quarter dividend per share is KRW 20,000, with KRW 10,000 from core operating profit and KRW 10,000 from the sale of Kioxia equity. The company intends to allocate most Kioxia-related sale proceeds as special dividends at year-end.
On the demand side, the company has signed long-term agreements (LTAs) with 14 core customers, including major global cloud service providers (CSPs), locking in more than 50% of total capacity for 2027 and 2028. The company reiterated that memory demand will continue to outpace supply through 2030.
FX Losses and Weak PC/Smartphone Demand Present Risks
Despite overall operational outperformance, pre-tax profit and net profit fell short of expectations, mainly due to foreign exchange losses (KRW 11.6 trillion) and investment valuation losses related to Kioxia (about KRW 22.9 trillion).
In addition, demand for PC and smartphone terminals showed some localized signs of weakness, with some product shipments adjusted, and the product mix also shifting due to rising memory prices.
On capital expenditure, third-quarter capex was KRW 12.7 trillion, with KRW 31 trillion accumulated year-to-date. JPMorgan’s full-year forecast is KRW 47 trillion, and current progress is in line with expectations. The company stated that capex is mainly focused on infrastructure construction at Yong-in industrial cluster and key equipment purchases for the M15X line, and expects capex in 2027 to increase significantly from 2026.
JPMorgan: Consensus Earnings Forecasts Likely to Be Upgraded Further
JPMorgan believes this quarter’s better-than-expected results will drive upward revisions in consensus earnings forecasts, and that the bottom-up logic of memory supply and demand fundamentals remains favorable over the next 12–24 months. Analysts highlighted that 2027 HBM pricing and the structural mix and price hikes between LTA and non-LTA customers remain key variables shaping the magnitude of consensus EPS upgrades.
The report values SK Hynix at 7x average forecast EPS for 2026–2027, reflecting expectations of a stronger and longer memory upcycle.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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