SK hynix’s third-quarter price increases lift operating profit; 100 trillion won shareholder return plan exceeds expectations
Higher server memory and enterprise SSD prices drove SK hynix’s third-quarter revenue and operating profit to quarterly records, but foreign-exchange and investment valuation losses left net profit below expectations. The company also announced a large shareholder return plan and expects memory shipments to accelerate in the fourth quarter.
Original source：J.P. MorganFirst published on Unhidea：Original source date：
Key takeaway
J.P. Morgan believes rising memory prices and HBM product upgrades support SK hynix’s earnings, but foreign-exchange and investment valuation losses, diverging end-market demand and higher future capital expenditure also affect the outlook for profits and cash returns.
What drove the third-quarter outperformance?
SK hynix’s third-quarter revenue was 104.6 trillion won and operating profit was 83.3 trillion won, up 32% and 38% quarter on quarter, respectively, both quarterly records. The figures exceeded market consensus by 7% and 9%, respectively.
Pricing was the key driver: the DRAM average selling price rose quarter on quarter by approximately the high end of the 20% range, above J.P. Morgan’s forecast of 20%; NAND prices rose by approximately the middle of the 20% range, also above the bank’s forecast of 12%. DRAM bit shipments grew about 10% quarter on quarter, in line with the bank’s forecast; NAND bit shipments fell slightly, below its forecast of 3% growth.
J.P. Morgan believes the better-than-expected DRAM selling price indicates a smooth HBM4 ramp. Stronger server DRAM and enterprise SSD prices, together with an overall shipment trend above company guidance, offset some foreign-exchange headwinds.
Why did net profit miss expectations despite record operating profit?
Third-quarter pretax profit was 50.7 trillion won, down 59% quarter on quarter and 33% below market consensus; net profit was 39.5 trillion won, down 58% quarter on quarter and 35% below consensus.
J.P. Morgan attributes the pretax and net profit misses mainly to a 11.6 trillion won foreign-exchange loss and a 22.9 trillion won investment valuation loss that may be related to Kioxia.
End-market demand is not strengthening uniformly: the report observes adjustments in PC and smartphone device shipments and changes in product mix that may be related to rising memory prices.
How will fourth-quarter shipments and the HBM product mix change?
The company expects fourth-quarter DRAM bit shipments to grow quarter on quarter by approximately the middle of the 20% range, well above J.P. Morgan’s previous forecast of 4%; NAND is expected to grow by approximately the mid-single digits, above the bank’s forecast of 3%. Supporting factors include expanded 1c-nanometer process capacity, the M15X ramp and increased sales of 321-layer enterprise SSDs.
The company expects the M15X ramp to accelerate to full production before the end of 2026; in the fourth quarter, HBM4 will account for a greater share than HBM3E of both HBM bit shipments and revenue. HBM negotiations for 2027 have concluded, and the company expects the profitability gap between HBM and conventional DRAM to narrow significantly.
The company reiterated that memory demand will exceed supply through 2030 and has signed long-term agreements with 14 key customers, locking in supply volumes for 2027 and 2028 exceeding 50% of total capacity in each respective year. J.P. Morgan believes 2027 HBM pricing, the mix of long-term and non-long-term agreements, and price increase quotations will affect the magnitude of upward revisions to market earnings forecasts.
How will shareholder returns and capital expenditure be managed together?
The company announced a 2026 shareholder return plan totaling 100 trillion won, including 60 trillion won in buybacks and 40 trillion won in dividends. J.P. Morgan believes the total exceeds market consensus of approximately 40 trillion won and equals more than 65% of its forecast 2026 free cash flow.
The third-quarter dividend per share was 20 thousand won, of which 10 thousand won came from core operations and another 10 thousand won from the sale of Kioxia shares. The company plans to use most of the proceeds from selling its Kioxia stake for a year-end special dividend.
Third-quarter capital expenditure was 12.7 trillion won, bringing the total for the first three quarters to 31 trillion won, in line with the pace implied by J.P. Morgan’s full-year forecast of 47 trillion won. Funds went mainly to infrastructure at the Yongin cluster, the M15X ramp and purchases of key equipment; management expects capital expenditure in 2027 to increase significantly from 2026.
J.P. Morgan maintains its Overweight rating and has a price target of 2.75 million won for June 2027, based on a valuation of 7 times forecast average earnings per share for 2026–2027. Its view depends on the memory upcycle continuing; lower-than-expected DRAM prices and margins, and uncertainty around end-market demand and inventories, are the main downside risks.
