UBS Key Call: SK Hynix
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UBS reiterates its Buy rating on SK Hynix (000660.KS) and raises the 12-month target price from KRW 1,550,000 to KRW 1,700,000, citing long-term fundamentals not fully reflected in the share price. Despite a 35% year-to-date gain, the stock has pulled back 17% from its February peak, driven by concerns over spot pricing, Google's TurboQuant, and HBM4 redesigns. The stock currently trades at 1.54x NTM price-to-book, implying a long-term ROE of 17.3%, well below the 10-year average of 21.0%.
UBS expects HBM demand to continue cannibalizing DDR capacity, with front-end DRAM allocated to HBM reaching 25% by end-2026 and 31% by end-2027. The HBM4 redesign is progressing smoothly, undergoing final qualification for Nvidia/Rubin. UBS adjusts its HBM4/Rubin market share assumptions to 60% for SK Hynix, 30% for Samsung, and 10% for Micron.
2026/2027 EPS forecasts are revised upward by 22%/29%. UBS raises 1Q26 operating profit to KRW 41.8 trillion (from KRW 35.9 trillion), significantly above the Visible Alpha consensus of KRW 32.2 trillion. Full-year 2026 operating profit is lifted to KRW 286.0 trillion and 2027 to KRW 443.5 trillion. A potential ADR listing alongside Korean share buybacks could serve as a dual catalyst. Based on the target price, the stock offers 86% potential upside.