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<Research> Macquarie Raises SK Hynix TP 61% to 2.9M Won, Expects Worsening Memory Shortage
Recommend 11 Positive 11 Negative 4 |
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South Korea's stock market suffered a "crash" today (15th), with the KOSPI plunging 488 points, or 6.1%, to close at 7,493. Heavyweights Samsung Electronics and SK Hynix dragged down the broader market, ending down 8.6% and 7.7%, respectively. Macquarie said in a recent report that it raised its TP for SK Hynix by 61% to 2.9 million won, equivalent to 6x its forecast PE for next year, citing a "worsening" memory shortage. The broker expects the memory shortage to persist beyond 2027, while prices of high bandwidth memory (HBM) are set to surge, potentially providing a significant boost to the chipmakers earnings. Analysts Daniel Kim and Jacob Kim maintained an Outperform rating on the stock, noting that as earnings visibility improves, 2027 should better demonstrate Hynixs earnings strength compared with 2026. Macquaries bullish view is based on several arguments. Even as new fabs gradually commence operations from 2027 onward, the tight memory supply situation is unlikely to ease. Due to slower yield improvements at advanced process nodes and next-generation HBM chips consuming more wafer capacity, DRAM bit supply growth in 2028 is expected to remain capped at around 20%. Meanwhile, the proliferation of agent-based AI applications is projected to "significantly increase token demand," keeping memory prices elevated. Analysts said that when 2026 HBM annual contracts were finalized in October 2025, commodity DRAM prices were only a fraction of current levels, resulting in HBM margins being far lower than those of standard DRAM. Macquarie believes AI chip companies "will have no choice but to accept substantial price increases in 2027 HBM annual contracts," estimating hikes of more than 50%. The analysts also pointed to structural demand signals in long-term supply agreements. Reports indicate that both large and small major memory buyers are willing to sign five-year supply contracts, which Macquarie interprets as a signal that customers do not expect supply conditions to ease from 2028 onward. SK Hynix is seen as being in a position to select the most favorable terms, with 30% to 50% of its annual output potentially locked in under such agreements over the long term. Another share price catalyst highlighted by Macquarie involves the companys plan to pursue a US ADR listing. The analysts expect SK Hynix to deploy about 250 trillion won (approximately USD166.779 billion) over the next two years for share buybacks and cancellations, gradually increasing its ADR free float to more than 15% of shares outstanding. They believe this process should reduce domestic free float and attract passive fund inflows from US investors, providing additional support to the share price. (da/a) Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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