KB Securities said on the 9th that as SK hynix's U.S. American depositary receipt (ADR) listing serves as a catalyst to broaden the base of global investors, there is a high possibility that both the U.S. ADR and the domestic common stock will be re-rated together. It kept the target price at 4.2 million won and the investment opinion at "Buy."
Kim Dong-Won, head of research at KB Securities, said, "With the U.S. ADR listing set for July 10, access for global investors will expand, and we expect the valuations of the U.S. ADR and the Korea common stock to be re-rated simultaneously."
KB Securities cited the past case of TSMC. After TSMC listed its U.S. ADR in 1997, its global investor base expanded, the ADR traded at a premium to the Taiwan common stock, and as arbitrage between the common stock and the ADR became active, the corporate value in both markets rose together, it said.
Kim said, "The case of TSMC, which listed an ADR in the United States in Oct. 1997, is highly instructive," adding, "On the back of a broader base of global investors, the ADR formed a premium to the common stock, and in the process, demand for conversion and arbitrage that exploited the price gap between the common stock and the ADR occurred on an ongoing basis."
Kim added, "As a result, a virtuous cycle in which the Taiwan common stock and the U.S. ADR were re-rated together was reinforced," and said, "SK hynix is likewise highly likely to see a re-rating trend unfold between its U.S. ADR and its Korea common stock going forward. That is because the scarcity value of Korea memory semiconductor stocks is expected to stand out significantly."
The memory cycle was also expected to be stronger than the market anticipated. While supply increases are limited, demand centered on artificial intelligence (AI) is rising rapidly, leading to continued gains in memory prices, the outlook said.
Kim said, "In 2027, DRAM and NAND wafer production capacity is expected to increase only 7% and 4%, respectively, from the previous year," and analyzed, "In effect, supply growth will be extremely limited through next year, while the growth rate of demand is expected to reach 17% and 19%, respectively."
Kim added, "In 2027, the memory supply shortage is highly likely to deepen compared with 2026," and said, "In the second half of this year, the rate of increase in memory prices is expected to exceed market expectations, and in 2027, high bandwidth memory (HBM) prices are expected to rise more than 100% year over year, considering the profitability gap with commodity DRAM."
Reflecting this cycle, SK hynix's earnings outlook was also seen as likely to be revised up further.
Kim said, "SK hynix's 2026 and 2027 operating profit estimates of 290 trillion won and 468 trillion won are expected to have a high likelihood of further upward revision going forward."
KB Securities expected expanded AI investment to drive memory demand for a prolonged period. It said the larger AI infrastructure investment becomes, the faster memory's share will rise.
Kim said, "Global AI investment will expand from $390 billion in 2025 to $1.1 trillion in 2027, an increase of about threefold in two years," and explained, "AI agents are expected to triple memory demand, autonomous driving fivefold, and Robotics more than tenfold."
Kim continued, "The share of memory in AI infrastructure investment is estimated to surge from 14% in 2025 to 50% in 2027," and said, "Ultimately, the expansion of AI infrastructure investment is expected to translate directly into improved results for SK hynix."
Kim added, "At the current price level, trading at 4.5 times 12-month forward price-to-earnings ratio (PER), there is ample upside, and we judge the semiconductor rally is not over yet."