SK hynix memory price increases lift quarterly profit; Nomura bets buybacks will amplify earnings per share
Third-quarter operating profit in 2026 exceeded Nomura’s forecast, but net profit fell quarter on quarter because of investment and foreign exchange losses. Nomura expects memory volumes and prices to continue rising and believes share repurchases and cancellations will further increase earnings per share.
Original source：Nomura International (Hong Kong) Ltd.First published on Unhidea：Original source date：
Key takeaway
Nomura is positive on the combined effect of growth in SK hynix’s memory chip volumes and prices and share repurchases and cancellations, but the extent of the increase in earnings per share depends on future buyback volumes and share prices.
Why did third-quarter profit exceed expectations?
SK hynix reported third-quarter 2026 revenue of approximately 105 trillion won, up 32% quarter on quarter. Operating profit was approximately 83 trillion won, up 38% quarter on quarter and above Nomura’s previous forecast of 77 trillion won.
The main driver was higher conventional DRAM prices, which rose 27% quarter on quarter, above Nomura’s earlier forecast of 24%. Overall DRAM shipments grew 10%, with conventional products up 14% and HBM shipments down 9%.
NAND prices rose approximately 25% quarter on quarter, above Nomura’s forecast of 20%; shipments, however, fell 1% quarter on quarter, below the bank’s forecast of 6% growth. Nomura estimates third-quarter operating margins for DRAM and NAND at 83% and 72%, respectively.
The increase in operating profit was not accompanied by a corresponding rise in net profit. Weighed down by a decline in Kioxia’s share price and foreign exchange losses, third-quarter net profit was approximately 40 trillion won, down 58% quarter on quarter.
What will drive growth in the fourth quarter and next year?
Nomura forecasts fourth-quarter 2026 revenue of 132 trillion won and operating profit of 108 trillion won, up 26% and 30% quarter on quarter, respectively. It expects DRAM shipments to grow 25% and the average selling price to rise by more than 15%, driving 31% growth in DRAM revenue.
The bank expects fourth-quarter NAND shipments to grow 6% quarter on quarter and the average selling price to rise 16%. It has also raised its full-year 2026 operating profit forecast from 274 trillion won to approximately 290 trillion won.
Nomura expects growing data-center demand to tighten supply further in 2027 and forecasts operating profit of 500 trillion won for 2027, up 73% year on year. The bank expects a higher share of HBM4 and new pricing reflected from the first quarter of 2027 to raise the average HBM price in 2027 by 74% year on year.
This assessment is also constrained by contract pricing: long-term agreements account for approximately 50% of SK hynix’s shipped bit volume, and visibility into the sensitivity of their prices to changes in the overall average selling price is currently limited.
How large is the shareholder return plan?
Management has guided for total shareholder returns of approximately 100 trillion won in 2026. Following a completed 40 trillion won buyback, the company plans another 20 trillion won repurchase based on third-quarter results, with 10 trillion won for shareholder returns and 10 trillion won for employee bonuses. Dividends of 14 trillion won have been confirmed.
Nomura expects full-year shareholder returns to exceed 100 trillion won after further fourth-quarter buybacks and dividends, equivalent to approximately 58% of its forecast full-year free cash flow and above the company’s return framework of “more than 50% of free cash flow.” The bank expects full-year dividends to exceed 30 trillion won, above its previous forecast of 7 trillion won.
How do buybacks change the valuation assessment?
Nomura assumes that from the second half of 2026 through 2028, the company will use 412 trillion won of shareholder return funds excluding dividends to repurchase and cancel shares. At the share price at the time of the report, 34% of total shares could be cancelled.
Under this scenario, if net profit in 2028 grows 81% from 2026, earnings per share could rise 145% because of the reduced share count. The higher the repurchase price, the fewer shares the same funds can cancel.
Nomura maintains its Buy rating and 4.7 million won target price, calculated using book value per share of 973,288 won over the next 12 months and a target price-to-book ratio of 4.8 times. The share price at the time of the report was 1.487 million won, corresponding to price-to-earnings ratios of 2.2 times for 2027 and 1.6 times for 2028, based on the bank’s forecasts.
