No fear of pullbacks! UBS raises SK Hynix target price, predicts "three major catalysts" are coming
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The AI-driven storage super cycle is accelerating, with SK Hynix as the core leader in the sector, continuing to benefit from tightening supply-demand dynamics and technological generational upgrades.
Despite SK Hynix falling 8% over the past five trading days, according to Chase Trading Desk, UBS raised its 12-month target price from 3 million won to 3.2 million won in its latest report released on July 3. The report states that the recent price correction is only a temporary phenomenon, and subsequent three major catalysts—the implementation of long-term supply agreements, mass production and shipment of HBM4, and potential stock buybacks after ADR listing—will drive revaluation.
In terms of earnings forecasts, the report predicts the company’s operating profit will reach 32.7 trillion won in 2026, about 27% higher than consensus estimates; and 62.3 trillion won in 2027, about 54% above consensus.
In terms of valuation, the current stock price corresponds to a P/B ratio of only 2.76x for 2027, implying a long-term ROE of about 31.7%, significantly lower than UBS’s forecast of 41.9%, reflecting that the market has not fully priced in the company’s structural earnings leap. Even though the cumulative share price increase this year has exceeded 258%, UBS believes the scope for valuation recovery remains sufficient.
Clear short-term recovery logic: price lock-in through long-term agreements, ramp-up of HBM4, increased share buybacks
SK Hynix's short-term trading logic is clear: after the correction, catalysts remain concentrated.
First, the company is accelerating the rollout of revised long-term supply agreements (LTAs) with hyperscale cloud providers, covering DDR5 and NAND Flash. The new agreements last over five years, locking in about 60%–70% of planned shipments and prices, significantly enhancing future earnings visibility, helping to alleviate the suppressive effects of cyclical volatility in the memory sector on valuation.
Second, HBM4 progress has entered a critical phase. The report notes that SK Hynix has essentially completed final design optimizations and expects to begin large-scale shipments of HBM4 for the Rubin platform in Q2 2026. Although Samsung may slightly lead in HBM bit market share in 2027 (41% vs. 39%), SK Hynix has a long-term advantage in the proportion of HBM in DRAM business revenue, which is forecast to rise from 15% in 2026 to 58% in 2030.
Finally, the shareholder return narrative is steadily strengthening. After ADR listing, stock buyback plans are expected to launch and gradually intensify. Market attention has shifted from the share price’s increase itself to whether current valuation fully reflects higher profit margins, improved free cash flow, and continually enhanced shareholder returns.
Bullish on memory chips, DRAM and NAND both strengthen
The report holds an optimistic outlook for contract prices of memory chips in the second half of 2026.
Taking into account factors such as long-term supply agreements (LTA) and the impact of HBM products, the firm predicts SK Hynix’s average DRAM selling price (ASP) will rise quarter-on-quarter by 43% in Q2 2026, with DDR mixed ASP excluding LTA effects increasing by as much as 67%; DRAM ASP in Q3 and Q4 is expected to rise by another 21% and 13%, respectively.
For NAND Flash, UBS expects mixed ASP to rise quarter-on-quarter by 43%, 25%, and 10% in Q2, Q3, and Q4 of 2026. The bank points out that the rise of Agentic AI is significantly driving storage demand from multiple angles—AI servers’ increasing use of DDR5/LPDDR5, KV cache, and storage NAND.
Accordingly, UBS forecasts that DRAM bit terminal consumption will grow by 36% year-on-year in 2027, up from 22% in 2026; NAND bit terminal consumption growth is also expected to accelerate from 20% further onward.
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The above highlights are from Chase Trading Desk.
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