UBS: Raised SK Hynix target price to 3.2 million won, raised average selling price and operating profit forecast.

Golden Finance reports that on July 7, UBS published a report stating that it believes SK Hynix is continuously pushing to sign more revised long-term agreements (LTAs), focusing on DDR5 and NAND Flash for hyperscale data center customers. These contracts have terms exceeding five years, with approximately 60% to 70% of expected volume and price already locked in, providing higher visibility for future earnings. Based on a forward 12-month price-to-book ratio of 3.65 times, the bank raised its target price from 3 million won to 3.2 million won, maintaining a "Buy" rating.

In addition, SK Hynix has begun ramping up shipments of HBM4 for the Rubin platform starting in the second quarter, indicating that it has completed final design adjustments to meet specifications. Although Samsung Electronics may slightly lead SK Hynix in HBM bit market share by 2027 (41% vs. 39%), in the long term, HBM's share of SK Hynix's DRAM business is expected to be higher than that of its peers. The bank predicts that HBM's share of DRAM revenue will rise from 15% in 2026 to 58% in 2030. Further increases in HBM average selling prices would provide additional support for 2027 profits. Additionally, the bank noted that shareholder return policies are expected to continue strengthening. It expects share buybacks to be initiated after the ADR listing and to gradually accelerate.

The bank stated that there is still room for further increases in DDR and NAND Flash contract pricing in the second half of 2026. Considering the revised long-term agreements and HBM, it forecasts DRAM average selling prices to increase by 43% quarter-over-quarter in Q2 2026, 21% in Q3, and 13% in Q4. For NAND, it expects blended average selling prices to increase by 43% quarter-over-quarter in Q2, 25% in Q3, and 10% in Q4. Given the upward revision in ASP forecasts, UBS raised its operating profit forecast for this year by 7% to 327 trillion won, and by 12% for each of the following two years to 623 trillion won and 667 trillion won respectively.