SK Hynix Plunges 15% in a Week! CLSA: Worst Is Over, Shareholder Returns Clearer, Maintains 'Outperform' Rating

CLSA has issued a new report stating that SK Hynix announced after Friday's (7th) market close that it is actively reviewing measures to strengthen shareholder value, with details to be disclosed within the third quarter. This move directly responds to market dissatisfaction over the company's lack of clear capital allocation guidance during its recent Q2 earnings call, which has been one of the key reasons behind its recent stock weakness.

CLSA believes that driven by AI server demand boosting HBM shipments, SK Hynix's profitability and free cash flow will remain exceptionally strong through 2028. The company's shareholder returns in 2024 could exceed 100 trillion Korean won (including dividends and buybacks), a significant increase from previous years. This not only materially enhances shareholder value but could also serve as a catalyst for stock re-rating.

As a result, CLSA maintains its 'High-Conviction Outperform' rating on SK Hynix, with the target price unchanged at 3.7 million Korean won.

Regarding recent market concerns that 'SK Hynix's ASP growth in HBM4 price negotiations with NVIDIA may lag behind peers,' CLSA offers a contrarian view. SK Hynix uses older process nodes for the core and base dies in its HBM4, resulting in a significantly lower cost structure than competitors. Even if the final selling price is lower than expected, the company's gross margin is still likely to outperform peers, preserving its profitability moat as the HBM market leader.

The report also notes that amid an ongoing AI capex cycle and mass production ramp-up of HBM4, SK Hynix is transitioning from a 'cyclical stock' to a 'high-cash-return growth stock' narrative. Once the shareholder return plan is finalized in Q3, valuation suppression is expected to ease. While the market is currently focused on slowing pricing momentum, CLSA emphasizes the dual certainty of free cash flow realization and capital return from 2026 to 2028.