South Korea's NH Investment & Securities maintains a "Buy" rating on SK Hynix, but cuts its target price to 3.4 million Korean won.

South Korea's NH Investment & Securities maintained a "Buy" rating on SK Hynix, but cut its target price from 4.1 million won to 3.4 million won. Citing the HBM4 shipment timeline and faster-than-expected adoption of long-term agreements (LTAs), the firm took a cautious stance and slightly lowered its 2027-2028 earnings forecasts. Even so, the focus remains on the sustainable supply-demand and profit levels brought by LTA implementation, rather than industry downturn cycles. Currently, the market still has high skepticism about the effectiveness of LTAs, so more time is needed for validation. Once the LTA's effectiveness is confirmed by the market, it is expected to drive a re-rating of the company's valuation. Meanwhile, although the company's cash generation capacity has improved significantly, the lack of a clear shareholder return framework remains disappointing. If the company clarifies its capital allocation guidelines, this will serve as a key catalyst for stock price gains. Given the company's still-solid fundamentals, the recent stock pullback has been excessive. SK Hynix reported 79.3 trillion won in sales for Q2 2026, up 256.8% year-over-year (YoY) and 50.9% quarter-over-quarter (QoQ); operating profit stood at 60.5 trillion won, surging 557.2% YoY and 61.0% QoQ. The company's results slightly missed market expectations due to product mix adjustments and the initial implementation of LTAs. Looking ahead to Q3 2026, with HBM4 shipments accelerating, bit growth for DRAM and NAND is projected to rise 10.0% and 1.3% QoQ respectively, while combined average selling prices (ASPs) are expected to increase 16.5% and 7.0% QoQ. SK Hynix is forecast to post an operating profit of 76.2 trillion won in Q3 2026, up 569.6% YoY and 25.9% QoQ.