Market: KOSPI (000660)
Brokerage : Hanwha Investment & Securities
Analyst : Junyoung Park (Nawoo Kim)
Investment Rating : Buy (Maintain)
Target Price : KRW 3,150,000 (Lowered)
Core Momentum : Expanding LTAs are expected to raise the earnings floor through contractual demand and risk-sharing mechanisms, while improving capacity planning and reducing the frequency and severity of memory industry supply-demand cycles.
📊 1. [Valuation & Key Financial Metrics]
- Stock Performance & Investment Rating
- Investment Rating: Buy (Maintain)
- Target Price: KRW 3,150,000 (Lowered, applying 12MF EPS of KRW 432,306 and a 12MF P/E average of 7.3x)
- Current Price (As of 26/07/29): KRW 1,401,000
- Upside Potential: 124.8%
- Valuation Multiples
- Annual P/E Trend: 2024 51.5x → 2025 23.8x → 2026F 3.7x → 2027F 2.8x
- Annual P/B Trend: 2024 12.8x → 2025 6.5x → 2026F 2.6x → 2027F 1.4x
- Annual EV/EBITDA Trend: 2024 26.1x → 2025 16.3x → 2026F 2.9x → 2027F 1.2x
- Key Financial Forecasts
- 2024: Revenue KRW 66.19T, Operating Profit KRW 23.47T, Net Profit KRW 19.79T, EPS KRW 27,182, ROE 31.1%
- 2025: Revenue KRW 97.15T, Operating Profit KRW 47.21T, Net Profit KRW 42.92T, EPS KRW 58,955, ROE 44.2%
- 2026F: Revenue KRW 335.85T, Operating Profit KRW 262.63T (OPM 78.2%), Net Profit KRW 257.98T, EPS KRW 382,080, ROE 102.9%
- 2027F: Revenue KRW 496.48T, Operating Profit KRW 415.61T (OPM 83.7%), Net Profit KRW 332.87T, EPS KRW 460,252, ROE 60.9%
🚀 2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Review & Stock Correction Diagnosis
- 2Q26 preliminary results recorded revenue of KRW 79.3T (+51% QoQ, YoY +257%) and operating profit of KRW 60.5T (+60% QoQ, YoY +557%), slightly missing consensus estimates while maintaining solid performance.
- There are no material changes in explosive earnings or the upcoming 6-quarter trajectory; the recent sharp stock drop is judged to be driven by supply-demand and trading dynamics rather than deteriorating fundamentals.
- Structural Industrial Changes Driven by LTA Expansion
- LTAs are not merely extensions of contract durations; they represent risk-sharing structures between suppliers and customers encompassing minimum committed quantities, cost-based pricing, price floors and ceilings, deposits, and supply priority rights.
- While memory operating margins historically plummeted to 7.0%–10.0% during past down-cycles, expanding LTA proportions (targeting ~50% of total revenue) is projected to lift the operating margin floor to at least 30%.
- Customer benefits from LTAs include guaranteed supply during shortages and capped prices, maintaining strong retention even in down-cycles due to binding commitments such as deposits and potential loss of priority rights.
- Expectations for the End of Repetitive Over-Supply Cycles
- Past vicious cycles in the memory industry stemmed from distorted demand caused by customer double-ordering and subsequent aggressive over-expansion by suppliers.
- Following LTA expansion, production and capacity planning will rely on concrete contractual demand, significantly mitigating the frequency and intensity of over-supply and lowering structural volatility across the memory industry.
📝 Editor’s Comment (Perspective & Thesis Verification)
The analyst evaluates SK hynix as an enterprise that structurally elevates its earnings floor and reinforces stability through the expansion of long-term agreements (LTAs), despite short-term stock corrections driven by minor consensus misses and supply-demand noise. This perspective places greater emphasis on the structural improvement—namely raising the operating margin floor to at least 30% and reducing industry-wide cyclical volatility via LTAs—rather than short-term market fluctuations.
To verify whether this investment thesis unfolds as expected going forward, it is necessary to track whether SK hynix’s LTA portion actually expands to account for roughly 50% of total revenue, whether the binding nature and earnings-floor defense of LTAs are validated upon entering a down-cycle, and whether double-ordering subsides to alleviate the frequency and intensity of supply gluts. Such changes can be verified through future quarterly and annual earnings releases, official company IR materials, and regulatory filings.
📢 Disclaimer & Source
Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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