"A target price of 4.3 million won" ... Why SK hynix is being forecast to hit an all-time high

[Financial News] Hanwha Investment & Securities sharply raised its target price for SK hynix from 1.63 million won to 4.3 million won, citing the company’s structural improvement and outstanding earnings durability. This is the highest target price among domestic brokerages for SK hynix, representing a 164% increase from the previous estimate. The firm also strongly maintained its investment rating of "buy."
The main reasons behind the dramatic upward revision are the expansion of long-term supply agreements and SK hynix’s dominant position in the High Bandwidth Memory (HBM) market. In the past, South Korea’s memory semiconductor industry suffered from chronic valuation discounts because earnings swung sharply between boom and bust cycles, making it difficult for companies to break through the 10-times price-earnings ratio (PER) barrier. When a downturn arrived, profits often plunged or turned into losses, leaving little room for a premium valuation.
Analysts say the long-term supply agreements SK hynix has now signed are different from those in the past. They include downside protection clauses that help defend memory prices from falling, as well as legal mechanisms that enforce contract performance. As a result, the company can generate stable profits even when the industry slows.
Based on this, Hanwha Investment & Securities said that unlike in past downturns, when operating margins fell below 10%, SK hynix should be able to defend solid margins of at least 30% even if another slump comes.
The growing share of HBM, which has become an essential component in the era of artificial intelligence (AI), is also working in the company’s favor. HBM is estimated to account for about 20% of SK hynix’s total operating profit. Because HBM is less volatile in pricing than conventional general-purpose memory and far more profitable, it is expected to serve as a strong buffer for earnings over the medium to long term.
Despite this fundamental improvement in earnings power, SK hynix’s current stock price is seen as significantly undervalued compared with global peers. While Micron Technology, Inc., which has a virtually identical business structure, is fully valued at more than 10 times PER, SK hynix’s forward 12-month PER stands at just 6.6 times. The argument is that the company should no longer be constrained by the old P/B Ratio framework and should instead be valued using the standard multiples applied to global tech stocks.
In particular, the planned listing of American Depositary Receipts (ADR) in the U.S. stock market later this year is expected to become a powerful catalyst for a re-rating of the stock. Once SK hynix enters the U.S. market, it will be possible to compare its valuation directly with similar local companies.
With its overwhelming technological edge and strong fundamentals, exposure to the U.S. stock market could create a prime opportunity to close the valuation discount and attract capital from global investors.
moon@fnnews.com Moon Young-jin Reporter