LS Securities said Wednesday that SK hynix (000660.KS) will continue its growth trajectory centered on high-bandwidth memory (HBM), driven by expanding demand for artificial intelligence (AI) memory. The brokerage maintained its "buy" rating and raised its target price by 3.4% to 1.5 million won from 1.45 million won. The stock currently trades around 1.128 million won.
"Earnings growth expectations centered on HBM remain valid," said Jung Woo-sung, an analyst at LS Securities. "Ahead of major supply-demand events such as the ADR listing, there is a possibility that 2027 earnings growth will be priced in ahead of time."
First-quarter results are expected to show sharp growth. Revenue is projected to reach 55.8 trillion won ($38 billion), up 210.8% year-on-year, while operating profit is forecast to rise 410.6% to 35.6 trillion won ($24 billion). However, operating profit is estimated to come in about 10% below market consensus as performance-based bonus costs are reflected.
HBM is the key driver. With AI server adoption fueling a surge in HBM demand, the segment's share of total revenue is expected to expand to approximately 28.8% by 2026.
Rising memory prices are also supporting earnings improvement. The average selling prices (ASPs) of DRAM and NAND are climbing in tandem, strengthening profitability leverage effects, according to the brokerage. However, Nvidia's adoption of language processing unit (LPU) technology could partially slow the pace of HBM demand growth, which is cited as a variable.
Shareholder return policy is another investment point. The company has outlined plans to allocate 50% of free cash flow (FCF) to shareholder returns from 2025 through 2027, while maintaining a net cash position of around 100 trillion won ($68 billion). Accordingly, share buybacks and cancellations linked to this year's ADR listing are anticipated.
Over the medium to long term, there is ample room for dividend expansion, the analyst said. On a simple estimate basis, dividend per share (DPS) could rise to around 57,000 won by 2027.
"Alongside structural growth centered on HBM, medium- to long-term earnings visibility is high," Jung said. "The current share price still has sufficient upside room."
