SK hynix delivered its strongest quarterly results ever while unveiling a shareholder return plan that far exceeded market expectations, a combination that could pull the previously bearish sentiment on the stock back onto a positive track.
According to a research report released by JPMorgan on the 28th, SK hynix posted third-quarter revenue of 104.6 trillion won and operating profit of 83.3 trillion won, both record highs for a comparable period, beating consensus by roughly 7% and 9% respectively, and surpassing JPMorgan's own forecasts by about 11% and 16%. On the same day, the company announced a shareholder return plan worth up to 100 trillion won, comprising 60 trillion won in buybacks and 40 trillion won in dividends. JPMorgan noted that the market had previously expected only about 40 trillion won.
JPMorgan analyst Jay Kwon said in the report that the earnings beat combined with the new shareholder return program is expected to shift stock sentiment from previously bearish to positive. The report maintained its Overweight rating on SK hynix with a target price of 2.7 million won (based on a June 2027 time frame), implying roughly double the upside from the current share price of 1,343,000 won.
Strong Pricing, HBM4 Ramp Proceeding Smoothly
The core driver of this quarter's earnings beat came from the pricing side. SK hynix's third-quarter DRAM average selling price (ASP) rose nearly 30% quarter on quarter, well above JPMorgan's prior forecast of about 20%; NAND ASP rose about 25% quarter on quarter, also far exceeding JPMorgan's 12% estimate.
JPMorgan believes the stronger-than-expected DRAM ASP performance signals that the HBM4 mass production ramp is progressing smoothly. The company expects HBM4 to surpass HBM3E in both HBM shipment volume and revenue share in the fourth quarter, and plans to bring the M15X line to full capacity before the end of 2026. The company also disclosed that 2027 HBM pricing negotiations are essentially complete, and the profitability premium of HBM relative to conventional DRAM is expected to narrow noticeably.
On the shipment side, third-quarter DRAM bit shipments grew about 10% quarter on quarter, in line with JPMorgan's expectations; NAND bit shipments declined slightly, falling somewhat short of the expected 3% quarter-on-quarter growth. Foreign exchange was a partial drag, with a currency-related loss of 11.6 trillion won during the quarter.
Fourth-Quarter Shipment Guidance Far Above Expectations
The company's fourth-quarter shipment guidance came in well above market expectations. Management expects DRAM bit shipments to grow around 20% quarter on quarter, far exceeding JPMorgan's 4% forecast; NAND bit shipments are also expected to achieve mid-single-digit percentage quarter-on-quarter growth, above JPMorgan's 3% projection.
The company attributed this growth to 1cnm process capacity expansion, the M15X line ramp, and increased eSSD sales based on a 321-layer stacking architecture. The share of 321-layer NAND in domestic capacity is expected to expand to more than 50% in the fourth quarter.
On the technology roadmap, the company plans to increase the proportion of 1cnm process server products and expand sales of 1cnm DDR5 and LPDDR5 SOCAMM.
Trillion-Won Buyback Far Exceeds Consensus, Long-Term Agreements Lock In Demand for the Next Two Years
The shareholder return plan was another major highlight of the announcement. SK hynix announced a 2026 shareholder return plan totaling 100 trillion won, including 60 trillion won in share buybacks and 40 trillion won in dividends. According to JPMorgan's estimates, this scale corresponds to a payout ratio of more than 65% of 2026 free cash flow.
According to JPMorgan, the market had previously expected the plan to total about 40 trillion won, meaning the actual announced scale is roughly 2.5 times consensus. The company also announced the same day that it would launch a 20 trillion won buyback, of which 10 trillion won is for shareholder returns and another 10 trillion won is for employee stock ownership plan (PSU) purchases. The third-quarter dividend per share was 20,000 won, of which 10,000 won came from core operating profit and another 10,000 won from gains on the sale of Kioxia equity. The company plans to distribute most of the Kioxia sale-related gains as a special dividend by the end of the year.
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 exceed supply through 2030.
FX Losses and Soft PC and Smartphone Demand Pose Concerns
Although operating performance beat expectations across the board, pretax profit and net profit both fell short, mainly due to foreign exchange losses (11.6 trillion won) and Kioxia-related investment valuation losses (about 22.9 trillion won).
In addition, demand in PC and smartphone end markets showed signs of localized weakness, with shipments of some end products undergoing adjustments and product mix also shifting due to higher memory prices.
On capital expenditure, third-quarter capex was 12.7 trillion won, bringing the year-to-date total to 31 trillion won. JPMorgan's full-year forecast is 47 trillion won, and progress so far is in line with expectations. The company said capex is mainly focused on infrastructure construction for the Yong-in cluster and procurement of key equipment for the M15X line, and it expects capital expenditure in 2027 to increase significantly compared with 2026.
JPMorgan: Clear Room for Consensus Earnings Estimates to Rise
JPMorgan believes this quarterly earnings beat will push consensus earnings estimates higher, and the bottom-up logic for memory supply-demand fundamentals over the next 12 to 24 months remains favorable. The analyst noted that 2027 HBM pricing, as well as the mix between long-term agreement and non-long-term agreement customers and the magnitude of price increases, remain key variables affecting the extent of consensus earnings per share (EPS) upgrades.
The report values SK hynix at 7 times the average of forecast EPS for 2026 to 2027, reflecting expectations of a stronger and more durable memory upcycle.
Comments