Nomura: SK hynix: Memory price increases lift operating profit; can buybacks amplify earnings per share?

What drove the third-quarter earnings beat?

SK hynix reported third-quarter 2026 revenue of 105 trillion won and operating profit of 83 trillion won, up 32% and 38% quarter on quarter, respectively. Operating profit exceeded Nomura’s earlier estimate of 77 trillion won.
The main driver was higher prices for conventional DRAM: prices rose 27% quarter on quarter, above Nomura’s forecast of 24%. Total DRAM bit shipments grew 10%, with HBM down 9% and conventional DRAM up 14%.
NAND prices rose about 25% quarter on quarter, above Nomura’s forecast of 20%; however, bit shipments fell 1%, weaker than the bank’s forecast of 6% growth.
While operating profit rose, net profit was approximately 40 trillion won, down 58% quarter on quarter, weighed down by a fall in Kioxia’s share price and foreign-exchange losses.

Nomura forecasts fourth-quarter revenue of 132 trillion won and operating profit of 108 trillion won, up 26% and 30% quarter on quarter, respectively. It expects DRAM bit shipments to grow 25% and average selling prices to rise more than 15%, driving 31% growth in DRAM revenue.
The bank expects increased data-center demand in 2027 to exacerbate supply shortages and lift average HBM prices by 74% year on year: the share of higher-priced HBM4 is rising, while new prices will start to be reflected from the first quarter of 2027.
Price pass-through still has limits: long-term agreements account for about 50% of SK hynix’s bit mix, and it remains unclear how sensitive their prices are to changes in the overall average selling price. Nomura assumes only modest quarterly price increases for conventional DRAM and NAND in 2027.

Management’s shareholder-return guidance for 2026 is approximately 100 trillion won. The company has completed 40 trillion won in buybacks and plans another 20 trillion won in buybacks 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 determined.
Nomura expects full-year shareholder returns to exceed 100 trillion won, representing about 58% of its 2026 free-cash-flow forecast. The bank also expects additional buybacks and dividends in the fourth quarter.
In Nomura’s scenario, if 412 trillion won is used to repurchase and cancel shares at the current share price from the second half of 2026 through 2028, shares outstanding would decline by 34%. Assuming net profit in 2028 is 81% higher than in 2026, earnings per share could rise by 145%. The higher the share price, the fewer shares the same amount of money can buy back.

Nomura forecasts operating profit of 500 trillion won in 2027 and 606 trillion won in 2028, up 73% and 21% year on year, respectively. The bank believes long-term agreements and demand secured through 2028 help support the memory business’s performance.
Nomura maintains its buy rating and 4.7 million won target price, based on book value per share over the next 12 months multiplied by a price-to-book ratio of 4.8 times. At the share price used in the report, forecast price-to-earnings ratios for 2027 and 2028 are 2.2 times and 1.6 times, respectively.
Constraints on this assessment include a slowdown in AI capital spending amid high interest rates, power-supply shortages delaying data-center construction, and possible additional US tariffs on semiconductor products.