JPMorgan has significantly raised its target price for SK Hynix to 1 million won. The bank believes the long-term growth trend for AI memory demand remains intact, and this, combined with a potential US listing plan, will serve as a dual catalyst for driving the stock price higher. According to market sources, the JPMorgan analysis team led by Jay Kwon maintained its "Overweight" rating on SK Hynix in a report on the 16th and raised the December 2026 target price from the previous 800,000 won to 1 million won. Analysts pointed out that strong pricing momentum over the next 3 to 6 months will drive upward revisions to earnings estimates, forecasting a 20% to 25% upside potential for earnings per share (EPS) in fiscal years 2026-2027. At the time of writing, SK Hynix's share price was up 1.26% to 765,500 won per share. Beyond robust fundamental performance, new developments in capital operations have also become a market focus. As previously reported, SK Hynix stated in a regulatory filing last December that the company is "evaluating various measures to enhance corporate value, including the possibility of utilizing treasury shares for a listing on the US stock market, but nothing has been finalized yet." JPMorgan believes that an ADR listing will be the next key event catalyst, potentially narrowing its valuation gap with US peers. Benefiting from the consolidation of its technological leadership in HBM4 and the extension of the traditional memory cycle, JPMorgan advises investors to accumulate positions. The bank's target price, set based on expectations for the end of 2026, reflects an anticipation of a stronger and longer upcycle for the memory industry, granting a 30% premium to its historical peak price-to-book (P/B) ratio. HBM4 and Capacity Expansion Solidify the Technological Moat JPMorgan analyst Jay Kwon noted in the report that SK Hynix's recently announced 19 trillion won packaging plant investment plan reaffirms the company's firm commitment to prioritizing the development of AI memory business solutions. This plan, targeting the new PT7 factory which is expected to begin mass production in 2028, aims to consolidate backend packaging and testing resources currently dispersed across multiple facilities and expand production capacity. Although the proportion of HBM sales is expected to temporarily decrease to 30% this year (down from 38% last year) due to significant price increases for traditional memory, JPMorgan predicts this ratio will rebound to 39% starting in 2027 and continue to rise in subsequent years. Regarding the technology roadmap, JPMorgan believes SK Hynix will continue to maintain its market share and technological leadership. Despite an anticipated slight decline in its value share to just below 50%, attributed to a high base effect and normalization of competitors' shares, the company is still expected to capture a major share in the next-generation HBM4/4E market, thereby supporting high industry margin performance. Strong Pricing Momentum Drives Upward Earnings Revisions The report indicates that server demand is driving upside in both the traditional DRAM and NAND markets. Based on upward revisions to the CoWoS model, JPMorgan has raised its 2026-2027 total addressable market (TAM) estimate for HBM by 7-9% and maintains a bullish view on a multi-year upcycle. Consequently, JPMorgan has raised its EPS expectations for SK Hynix for fiscal years 2026-2027 by 20-25%. The new target price of 1 million won is based on a price-to-book (P/B) ratio of 2.7x, implying a 30% premium to the historical peak P/B ratio over the past 15 years. Analysts believe that given the higher beta of pure-play memory businesses, fundamental improvements will position SK Hynix favorably. Reflecting the new PT7 investment plan, JPMorgan has raised its capital expenditure (Capex) forecast for fiscal years 2026-2027 to 36-48 trillion won, with the increase primarily coming from infrastructure spending. Nevertheless, the implied capital intensity remains at 20-23%, significantly lower than the historical average of 33% from 2016 to 2025. US ADR Listing: A Key Step Towards Valuation Re-rating The possibility of SK Hynix listing in the US is seen as an important pathway to enhance shareholder returns and reshape its valuation. It is reported that the company has received proposals from several investment banks, planning to list approximately 2.4% of its outstanding shares, equivalent to about 17.4 million shares, in the form of American Depositary Receipts (ADRs). SK Hynix stated in a regulatory filing last December that the company is evaluating the possibility of using treasury shares for a US listing to enhance corporate value. Analysis suggests that through an ADR listing, SK Hynix could not only narrow the valuation gap with peers like Micron and TSMC but also potentially attract capital inflows from passive funds, ETFs, and long-only funds that invest exclusively in US-listed stocks. JPMorgan noted in its report that while SK Hynix management has indicated it might implement a new shareholder return plan earlier if industry dynamics undergo a structural shift, it is still too early to assess this possibility. In contrast, an ADR listing is a more definite next key event catalyst. JPMorgan advises investors to focus on the earnings call scheduled for January 29th, paying close attention to management commentary on HBM4 certification, pricing, and margin impact. Furthermore, discussions on long-term agreements (LTAs), updates on supply and demand views across various end markets, and management's stance regarding the ADR listing will be key focal points for the market.
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