Why did third-quarter profit continue to rise?

  • SK hynix reported 83.3 trillion won in operating profit for the third quarter of 2026, up 38% quarter on quarter and 632% year on year, with an operating margin of 80%. Despite adverse exchange-rate effects, higher average memory chip prices and increased sales of high-value products drove profit growth.
  • DRAM bit shipments rose 10% quarter on quarter, including growth of more than 40% in server DDR5 shipments. Higher conventional DRAM prices and a greater share of HBM4 drove an approximately high-double-digit percentage increase in the DRAM average selling price quarter on quarter.
  • NAND bit shipments fell slightly quarter on quarter during the shift toward higher-value 321-layer TLC and enterprise SSD products, but higher prices and a greater share of SSDs drove an approximately 25% quarter-on-quarter increase in the NAND average selling price.

Where does the company expect incremental growth to come from?

  • The company expects DRAM bit shipments to rise approximately 25% quarter on quarter in the fourth quarter of 2026, driven by expansion of the 1cnm process and the ramp-up of HBM4 capacity at the M15X plant. As shipments of 321-layer enterprise SSDs increase, NAND bit shipments are expected to rise by a mid-single-digit percentage quarter on quarter.
  • The company expects DRAM and NAND bit shipments to grow year on year by approximately 25% and a high-teen percentage, respectively, in 2027. Long-term agreements already cover more than 50% of capacity for 2027 through 2028. Including customer demand still under discussion, the company believes its DRAM and HBM capacity is effectively sold out through 2029.
  • The company said customer demand is more than twice the available supply. Although HBM faces specification issues, their impact may be largely offset by increased capacity per die.

How did Citi adjust its profit forecasts and valuation?

  • Based on third-quarter results and its positive view of the memory market, Citi raised its fourth-quarter 2026 operating profit forecast from 89.8 trillion won to 107 trillion won, and raised its full-year operating profit forecasts for 2026 and 2027 by 7% and 12%, respectively.
  • Citi maintained its Buy rating and target price of 3 million won per share. Its sum-of-the-parts valuation applies an EV/EBITDA multiple of 7.9 to the HBM business and 6.3 to the conventional memory business. The bank believes HBM is evolving toward more customized products for customers, while its conventional memory valuation references levels seen in the early stages of previous cycles.
  • Risks to this view include a downturn in DRAM demand, NAND demand weaker than Citi forecasts and soft global consumption.

What does the shareholder return plan include?

  • The company announced a shareholder return plan of approximately 100 trillion won for fiscal 2026, listing approximately 30 trillion won in cash dividends and approximately 60 trillion won in share buybacks and cancellations, the latter including a previous 40 trillion won buyback.
  • The company announced a third-quarter dividend of approximately 14 trillion won, or 20 thousand won per share, including a special dividend of 10 thousand won per share from investment gains on Kioxia. Of the additional 20 trillion won buyback, 10 trillion won is earmarked for cancellation, while the remainder will be used for employee compensation and is excluded from shareholder returns.
  • Management plans to continue quarterly buybacks. Citi expects fourth-quarter shareholder returns of approximately 35 trillion won, including approximately 15 trillion won in buybacks and 20 trillion won in dividends.