Q3 storage price increases exceed expectations; HBM profitability to catch up with general DRAM next year; Nomura repeatedly raises target prices for SK Hynix and Samsung.

Storage chip industry is entering a new phase marked by accelerated price increases and significant profit expansion—Nomura Securities’ latest research report shows that price rises in Q3 will far exceed previous expectations, and the profit gap between HBM and standard DRAM will gradually be bridged around 2027. According to Zuifeng Trading Desk, Nomura released its global storage industry report on June 24, raising the target price for SK Hynix by 18% from 4 million KRW to 4.7 million KRW, maintaining Samsung Electronics’ target price at 670,000 KRW (previously raised from 590,000 KRW on June 22). As of the report’s publication date, Samsung Electronics’ stock price was 340,500 KRW, implying a 96.8% upside; SK Hynix's stock price was 2,580,000 KRW, with an implied upside of 82.2%. There are two core drivers for the upward target price adjustment: first, Q3 memory price increases are far beyond previous expectations; second, Nomura also raised the profit forecasts for 2027, and made more moderate assumptions about KRW appreciation. Q3 price rise far exceeds expectations Previously, Nomura predicted Q3 standard DRAM prices would rise about +5% quarter-on-quarter, and NAND around +25%. The latest report directly upgrades DRAM’s growth forecast to +24% quarter-on-quarter, with NAND remaining unchanged at +25%. There are three threads driving the price rise. First, prices for consumer products (phones, PCs, etc.) rose moderately in Q2, forming a low base, so Q3 has more catch-up potential. Second, cloud service providers (CSPs) are paying increasingly higher prices for DDR5 and LPDDR5. Third, sales structure is shifting toward high-priced HBM4 products, lifting overall average selling price (ASP). Analysts also expect shipment growth in the second half of the year will exceed the first half, as new capacity contributions gradually kick in. Q2 profit divergence: Samsung beats expectations, Hynix operating profit slightly below, but net profit shines In Q2, the two companies’ profit trends diverged notably. For Samsung Electronics, analysts upgraded Q2 operating profit forecast from 67 trillion KRW in the June 15 report to 76 trillion KRW. The main reason: the finalized labor agreement set bonus payout at 10.5%, lower than the previously assumed 12%, reducing bonus provision from 24 trillion KRW to 19 trillion KRW. Samsung’s price increases in Q2 "basically met previous assumptions," and surpassed peers. However, Samsung’s non-memory segment is under obvious pressure. Mobile (MX division) suffered hardware losses due to increased memory costs. Analysts estimate that even with 10%-15% increase in smartphone prices, it doesn’t fully offset the higher memory costs. Foundry/LSI segment losses also widened due to larger bonus payouts. For SK Hynix, analysts expect Q2 operating profit of about 60 trillion KRW, slightly below prior expectations. The reason: price increases for consumer electronics and smartphone-related products lagged behind server products in Q2, exceeding expectations. But Hynix’s net profit will far exceed market expectations. Analysts estimate that Hynix holds convertibles in Kioxia (about 14% equity), which increased in value by about 54 trillion KRW in Q2, combined with disposal gains from remaining SPC1 equity. Kioxia-related non-operating income will total over 60 trillion KRW. Thus, Hynix's Q2 net profit is expected to approach 100 trillion KRW. Analysts note that Hynix’s original investment in Kioxia was about 4 trillion KRW, now estimated to return 70-80 trillion KRW, nearly a 20-fold return. HBM profitability: Currently much lower than standard DRAM, expected to catch up in 2027 Nomura points out that HBM’s current operating profit margin (OPM) is about 50%, while standard DRAM is around 80%, with a big gap between them. The report uses simple math to show the difficulty of catching up: HBM products need to raise prices by over 100% to reach levels similar to standard DRAM, implying much greater space and necessity for HBM price increases. Therefore, Nomura believes HBM pricing increases in 2027 are "increasingly likely to exceed previous expectations," and accordingly raised HBM pricing assumptions. In SK Hynix’s forecast model, HBM’s ASP is expected to jump from about $12/GB (1Gb equivalent) in 2026 to about $24.1/GB in 2027, approximately a 100% rise. For SK Hynix, forecasts show HBM operating profit margin rising from about 57% in 2026 to about 70% in 2027, gradually approaching standard DRAM’s 84%. Long-term supply agreements ongoing, terms vary by supplier and customer Long-term supply agreements (LTA) are expected to primarily be signed with CSPs and Nvidia. It is understood that each storage supplier is currently negotiating LTAs with about 2 to 4 customers, with progress and key terms (including pricing and prepayments) varying by supplier and customer. Analysts expect LTAs to be executed from the second half of 2026 or in 2027, by which time more clarity on related terms will emerge. Specific terms are not yet disclosed, but their impact on suppliers’ profitability may diverge. 2027 profit forecasts significantly raised, Samsung’s dividends may increase nearly 9-fold Nomura raised Samsung Electronics' operating profit forecasts for 2026 and 2027 to 37.1 trillion and 59.8 trillion KRW, respectively (up 21% and 38% from May 15 estimates). SK Hynix’s 2027 operating profit forecast was raised by 19% from 39.4 trillion KRW to 46.8 trillion KRW. Two main drivers for the upward adjustment: memory price increases higher than assumed; plus Nomura’s forecast for KRW appreciation is more moderate—expecting Korean companies’ overseas M&A and domestic institutions’ demand for overseas asset allocation will be much greater during this supercycle, thus limiting excessive KRW appreciation. On shareholder returns, Nomura expects Samsung Electronics to start stock repurchases in the second half for staff compensation and shareholder returns, with some bought-back shares potentially cancelled. Assuming a 25% dividend payout rate, total dividends in 2027 would reach about 97 trillion KRW, a nearly 9-fold increase from 2025. This implies a common stock dividend yield of about 4.5%, preferred stock about 7.5% (both based on current prices). Four major risks cannot be ignored The report also lists four risks to continue monitoring. First, risk of data center construction delays. If US data centers are delayed due to labor shortages, insufficient power, or social resistance, it would negatively affect AI hardware supply chain demand. Second, risk of AI market concentration. If competition among AI developers evolves into a highly concentrated market structure, hardware supply chain bargaining power may weaken. The report thinks we're not there yet, but market concentration signs could emerge as early as 2027-2029. Third, risk from expansion by Chinese storage manufacturers. China’s memory suppliers currently account for about 30% of the domestic storage market and nearly 10% globally. If Chinese manufacturers accelerate expansion via local semiconductor equipment, it could impact mainstream storage markets. Fourth, risk of capital flow after sharp stock price increase. Samsung and Hynix stock prices have already increased 7-20 fold from the 2025 nadir, and both companies’ weight in emerging market benchmark funds now exceeds 10%. Korea National Pension’s domestic equity allocation has also exceeded its limit, implying potential selling pressure if stock prices rise further. As both firms accelerate repurchases and cancellations, supply-demand dynamics are expected to improve from the second half onward. ~~~~~~~~~~~~~~~~~~~~~~~~ The above is exciting content from Zuifeng Trading Desk. For more detailed interpretation, including real-time analysis and frontline research, please join 【Zuifeng Trading Desk ▪ Annual Membership】 Risk warnings and disclaimers The market involves risks, investment requires caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions meet their specific situation. Invest accordingly at your own risk.