Written by: Rita

SK Hynix's stock price fell 15% last week, underperforming KOSPI (-5%) and Samsung Electronics (-9%). The market is concerned about three issues: uncertainty regarding HBM specifications and pricing, unclear shareholder return timetable, and the disclosure of a 54 trillion won infrastructure capital expenditure plan. JPMorgan addressed these concerns one by one in a research report on August 9. JPMorgan pointed out that media reports of HBM pricing being halved are inaccurate, and the company will announce a new shareholder return plan by the end of September at the latest. Although the 54 trillion won capex plan is massive, it is aimed at preparing factory space in advance for the 1 million wafer capacity target by 2030. JPMorgan maintains an overweight rating with a target price of 2.75 million won.

HBM Pricing Discount Reports Misinterpreted

The market's biggest concern is HBM4 pricing. Some media reported that SK Hynix's HBM4 pricing in 2027 could be 50% lower than its competitors. JPMorgan clearly stated that this number is inaccurate.

JPMorgan's conservative pricing assumption is that the average HBM price in 2027 will increase by less than 40% year-on-year, based on three logical points. First, storage suppliers are currently more inclined to allocate LTA capacity to DDR5/LPDDR5/NAND, which also offers substantial profit margin premiums. Second, NVIDIA is SK Hynix's largest customer, and both parties have a long-standing product cooperation relationship, so pricing needs to be considered from a long-term procurement perspective. Third, HBM prices can be renegotiated every year, leaving room for adjustments in subsequent years. If SK Hynix successfully raises the average HBM price above JPMorgan's expectations, it will pose an upside risk to earnings per share forecasts.

Shareholder Return Plan to be Implemented by End of September

This is the most important catalyst in the short term. SK Hynix clearly stated in regulatory documents in early August that it is actively studying additional shareholder return measures, expected to be announced before the end of the third quarter. This timeline is earlier than what management stated in the second quarter earnings call of "by the end of the year."

JPMorgan believes the market will welcome a gradual shareholder return policy. Over the next three years, SK Hynix's cumulative free cash flow is expected to exceed 800 trillion won, and coupled with recent cash from the sale of Kioxia shares, the company's cash flow generation capability far exceeds its peers. JPMorgan pointed out that many investors initially expected SK Hynix's commitment to shareholder returns to be stronger than that of Japanese and American memory peers.

54 Trillion Won Capex Lays Foundation for 2030 Capacity

SK Hynix announced last week a capital expenditure plan of 54 trillion won (approximately 38.1 billion USD) for the construction of two new memory chip factories. Of this, 35.2 trillion won will be used for the Y2 DRAM factory in the Yongin cluster (slightly above the 31 trillion won plan for Yongin Phase 1), and 19.1 trillion won for the M17 NAND factory in Cheongju.

JPMorgan believes that while this figure may seem large, it needs to be understood in a longer-term context. Yongin Y2 is the second of four clusters planned in Yongin, expected to start construction in July 2027, mainly for capacity expansion after 2031. Cheongju M17 will begin construction in February 2027, with the first cleanroom expected to be completed by the end of 2028, and the investment cycle lasting until April 2031. SK Hynix has previously stated its goal of achieving a 1 million wafer capacity by 2030, and this capex plan disclosed aligns with that long-term roadmap and does not fall under short-term aggressive expansion.

Solidigm IPO Strategic Value Limited

Regarding SK Hynix's U.S. subsidiary Solidigm's IPO plans, management stated that it is still under evaluation and will be re-confirmed in a month. JPMorgan holds a cautious view on the strategic value of the IPO. SK Hynix's acquisition of Solidigm from Intel in 2021 was mainly to obtain enterprise-level SSD solutions, and after the loss period in 2023, this decision has proven successful. The NAND market has entered a supercycle driven by AI, with profit margins exceeding 70%.

JPMorgan believes that given SK Hynix's current internal cash flow generation capability and balance sheet, it can fully support capital expenditures without diluting existing shareholders. The Solidigm IPO may also trigger restrictions from South Korea's dual listing rules. From the standpoint of expanding the investor base and re-evaluating valuation, the strategic significance of the IPO is limited.

Last week, SK Hynix's stock price dropped mainly due to the market's overreaction to short-term news. Reports of HBM pricing discounts were misinterpreted, the shareholder return plan will be implemented earlier, and the 54 trillion won capex aligns with the 2030 capacity goal, not a short-term aggressive expansion. JPMorgan maintains an overweight rating with a target price of 2.75 million won, corresponding to an average earnings per share of about 7 times for 2026 to 2027. The storage supercycle continues, and SK Hynix's fundamentals have not changed.

Disclaimer

This article is a summary and interpretation of the third-party brokerage research report (JPMorgan, August 9, 2026) by Chao Xiang Research, combined with public market information. The ratings, target prices, earnings forecasts, and related judgments cited in the text are the views of the brokerage's analysts and only represent the position of their respective institutions, not the views of Chao Xiang Research, nor do they constitute any investment advice.

The market carries risks, and decisions should be independent. This article should not be used as a basis for buying or selling any securities.