SK hynix earns a record chip margin just as New York ADS holders pay 39% over Seoul value. I expect margins and the markup to fade, leaving steep downside.
Key points
- 76.3% operating margin in Q2 FY26, share of sales left after running costs, marks a peak that rarely lasts in memory chips.
- 38.7% New York markup on Oct 7 2026 means each ADS, a US ticket for a slice of Seoul shares, costs well above home market value.
- KRW 61.5T in future factory promises at Jun 30 2026 locks in heavy spending just as demand may cool.
The call
This price demands perfection. It values each ADS, a US ticket for a slice of Seoul shares, at 7.2 times last quarter chip profit stretched over a year. It also needs record Seoul levels to hold and the New York markup to last.
Target bridge from ADS price in dollarsAuthor arithmetic from Oct 7 Seoul close and FX.
Earnings will fade instead. The 76.3% margin, share of sales left after running costs, in Q2 FY26 falls as server demand cools and new supply arrives. I see chip profit near KRW 110.5T for 2027 with the markup shrinking toward single digits.
Valuation
| Estimate | Figure |
|---|
| 2027 sales | KRW 235T for 2027 |
| Operating profit at 47% margin for 2027 | KRW 110.5T for 2027 |
| Net profit after 25% tax for 2027 | KRW 82.8T for 2027 |
| Seoul value at 9 times earnings for 2027 | KRW 1,057,500 a share for 2027 |
| ADS target after currency and markup for 2027 | $85.23 a share for 2027 |
Second quarter sales are almost all DRAM and NAND- DRAM71.8%
- NAND27.7%
- Other0.5%
Company semiannual 6-K Aug 18 2026 note 21.
Memory makers trade near 9 times mid cycle profit. That fits volatile sales and heavy factory needs. Downside near 52% in 12 months supports the rating.
Risks
- AI server memory stays tight through 2027, which lifts Seoul prices and squeezes shorts.
- The KRW 40T buyback through Nov 19 2026 cuts share count faster than modeled, which lifts per share profit.
- Solidigm funding arrives on friendly terms in 2027, which cuts NAND losses and lifts profit.
What would change my mind
A third quarter where Seoul margins hold above 70% in Q3 FY26 on normal contract prices would prove demand stronger than I think.