★★KIS KR Tech: SK Hynix (000660) - 2Q26 miss is start of stable long term upside

KIS Semicon analyst Minsook Chae previews SK Hynix (000660) 2Q26 OPe at W60.4tn (+61% QoQ, +556% YoY), 8% below W65tn consensus. Analyst lowered the ASP growth assumption for 2Q26 due to Co's; 1) higher HBM sales mix vs peers (slower HBM ASP hike vs commodity), 2) lower commodity DRAM px hike by Co vs original street estimates, and 3) LTA effect (more stable ASP) starting to kick in. Accordingly, 2Q26 DRAM blended ASP growth rate estimate is lowered to +28.9% QoQ (previous +50.0%) and commodity DRAM ASP growth rate lowered to 34.2% (previous 60.6%). But, the blended ASP growth will return to market average rate of c. 10% QoQ in 3Q26 as HBM4 mass production begins in earnest.
HOWEVER, this is NOT a downturn signal. Rather, the near-term estimate revision is due to more realistic reflection of 3-5yrs LTA structures that will lead to more stable earnings growth over longer term (FY26/27/28 OP growth +419%/+53%/+19% YoY). In fact, analyst estimates Co-wide OPM to continue to rise from the record high 74.6% OPM expected in 2Q26. Expect valuation re-rating to reflect the sustainability of profits; LTAs are reducing earnings volatility and increasing visibility, which have been the discount factors.
Yet, upon the successful listing of the ADR, the diverged flows may continue between Hynix KS and SKHY ADR shrs in the near-term (cost benefit for US instos as cash trading now possible vs swap for KS), and with possible pair trading between the two. Thus, SEC (005930) / SEC-P (005935) may outperform Hynix KS in the near term.
=> Recommend SEC as top-pick with the expected earnings upcycle through FY27~28 driven by superior pricing leverage in conventional DRAM/NAND negotiations and Co's leadership position in HBM4/4e over competitors. Analyst also trimmed SEC's FY26/27 OP estimates by -4%/-5% to reflect LTAs (vs -9%/-11% for Hynix), but again, for more stable longer term growth. The imminent employee compensation related shr buyback and the biggest ever shareholder return to come (special dvd at end-FY26 + start of new 3yr shareholder return cycle) should also support the shrs.