Shareholder Return Rate to Reach 8% Next Year, Targeting "No Less Than 50% Free Cash Flow" -- Wall Street Interprets SK hynix's "40 Trillion Korean Won Buyback Plan"

While the market continues to debate the sustainability of the AI storage cycle and SK Hynix's share price has plunged since its June peak, the storage giant suddenly dropped a bombshell on the market. A historic buyback implemented ahead of schedule has reshaped market perceptions of Hynix's valuation logic!

Wallstreet News article wrote that on August 19, 2026, after the market closed, SK Hynix officially announced the long-awaited shareholder return policy—planning to repurchase and cancel shares worth 40 trillion Korean won, involving 24.07 million shares (accounting for 3.3% of outstanding shares as of the end of Q2 2026), equivalent to approximately USD 28.9 billion. This scale is not only the largest share buyback in Korean listed company history but also exceeds the approximately USD 26.5 billion Hynix raised in the U.S. through ADR financing at the beginning of July this year.

According to Chase Trading Desk, both top Wall Street institutions J.P. Morgan and Goldman Sachs gave very positive feedback on the announcement in their latest August 20 research reports. J.P. Morgan believes that the shareholder return policy has been substantially upgraded, from the previous "no more than 50%" to "not less than 50%", turning the policy ceiling into the policy floor. Goldman Sachs predicts an 8% shareholder return rate in 2027 and expects an additional buyback of approximately 7 trillion Korean won in the future.

Both J.P. Morgan and Goldman Sachs maintain a buy rating: J.P. Morgan’s target price is 2.75 million Korean won (about 84% upside from current price), and Goldman Sachs’ target price is 3.5 million Korean won (implying about 133% upside). The next key catalyst will be the Q3 earnings call at the end of October 2026, when the company will disclose a more comprehensive roadmap for shareholder returns.

Analysts believe this aggressive capital action directly proves to Wall Street that the company is "printing money" at a pace far exceeding market expectations. For the share price, which has plunged 49% since the June 22 high, this not only completely offsets the recent dilution effect from ADR issuance but also establishes a valuation floor (the current annualized P/E ratio is only 3.8x).

Buyback Scale: The Largest in History, and Implemented Ahead of Expectations

J.P. Morgan analyst Jay Kwon points out that the announcement of this 40 trillion won buyback landed "earlier than expected"—the market generally expected the announcement to come around late September, but the company chose to disclose directly after the close on August 19, showing management’s high confidence in the company’s cash flow situation.

From a scale perspective, this buyback carries multiple historical significances:

• 40 trillion won is the largest share buyback ever announced by a listed Korean company;
• Equivalent to USD 28.9 billion, higher than the approximately USD 26.5 billion Hynix raised through U.S. ADR issuance in early July, which means the company actually uses the buyback to "hedge" previous equity dilution;
• This amount is equivalent to 63% of the past 12 months rolling FCF (operating cash flow minus capital expenditures), already higher than the previous FCF allocation cap policy of "no more than 50%".

J.P. Morgan also points out that from a valuation perspective, Hynix’s current price corresponds to a P/E ratio of 6.4x (based on adjusted EPS for the past 12 months) or 3.8x (based on annualized adjusted EPS for the first half of 2026), which can be regarded as the management’s reference basis for initiating the buyback.

Policy Upgrade: From "Ceiling" to "Floor"

The core policy change in this announcement is the statement of the shareholder return ratio being upgraded from "up to 50%" to "50% or higher".

J.P. Morgan believes that this change in wording is a "substantive policy upgrade," turning the original ceiling constraint into a floor commitment, sending a clear signal to the market: future shareholder returns will only increase, not decrease.

Management further clarified that non-operating income (such as proceeds from sales of Kioxia shares, M&A related cash outflows, employee incentive share buybacks, etc.) is not included in the FCF calculation base, further enhancing the transparency and predictability of the FCF allocation policy.

J.P. Morgan also noted that in the past 8 months, Hynix has pledged to cancel a total of 39.4 million shares (including 15.3 million shares announced in February 2026 and 24.07 million shares canceled in this round), making it the most aggressive among memory peers.

Goldman Sachs: 8% Shareholder Return Rate in 2027, Target Price 3.5 Million Korean Won

Goldman Sachs analyst Jerry Shen interpreted this announcement with a more aggressive stance in his research report. Goldman’s core judgment is that the market underestimates Hynix’s cash flow generation ability.

Goldman predicts that cumulative FCF from 2025 to 2027 will reach 25.2 trillion won, and based on this, predicts:

• In addition to this 40 trillion won buyback, there will be approximately 7 trillion won of additional buybacks in the future;

• After comprehensive calculations, the 2027 shareholder return rate will reach 8%;

• Goldman Sachs raised its EPS forecasts for 2026 to 2028 by up to 10%;

• Maintains a buy rating with a target price of 3.5 million Korean won, implying about 133% upside from the current share price (1.491 million Korean won).

Goldman Sachs especially emphasized that the early disclosure of this announcement is itself an important signal—"this proves the company’s money-printing speed is much faster than the market realizes," calling this 40 trillion won buyback an 'appetizer,' foreshadowing even larger return plans to follow.

J.P. Morgan: Additional Return Opportunity Exceeds 16% Market Value by End of 2027, Target Price 2.75 Million Korean Won

J.P. Morgan’s calculation model is relatively conservative, but its conclusion is equally impressive.

Based on J.P. Morgan’s forecasts, Hynix’s cumulative FCF from 2025 to 2027 will be 47.5 trillion won. Under the "not less than 50%" allocation policy, and after the following announced items are deducted:

• This 40 trillion won buyback/cancellation;

• At least 4 trillion won dividends in 2025 and 2026;

• 12 trillion won share cancellation announced in February 2026;

J.P. Morgan expects that by the end of 2027, there will be at least 18 trillion won of additional shareholder return opportunity, equivalent to more than 16% of current market capitalization.

In addition, J.P. Morgan mentioned that the company is reviewing a new "value enhancement strategy" (including capital allocation and capital intensity targets), which is expected to be disclosed at the next key milestone after the Q3 earnings call.

J.P. Morgan maintains an overweight rating with a target price of 2.75 million Korean won (corresponding to a 7x P/E ratio based on average EPS for 2026 to 2027), believes "the worst is over", and recommends investors accumulate on weakness.

Subsequent Key Catalysts: Three Major Expectations Locked for the Next Two Months

J.P. Morgan highlighted three key catalysts for the coming months:

1. Q3 Earnings Call (by end of October): At that time, the company will disclose more details of its shareholder return plan. J.P. Morgan expects that this will include special dividend arrangements;

2. HBM Contract Price Update (by the end of September): High-bandwidth memory pricing dynamics will be an important reference for assessing the company’s profitability;

3. Update on U.S. Subsidiary Listing Plans (next month): The IPO progress of Hynix’s U.S. subsidiary will provide new room for imagination regarding the company’s capital operations.

J.P. Morgan notes that since the June 22, 2026 high, Hynix's share price has fallen by a total of 49%, significantly underperforming its memory peers (down 26% during the period) and Korea's KOSPI (down 29% during the period).

Factors dragging down the share price include: controversy over the sustainability of AI capital expenditures, the rapid spread of open-source models, and sustained selling pressure triggered by Q2 2026 results coming in below expectations.

J.P. Morgan believes that this proactive shareholder return announcement is expected to boost share price sentiment in the near term, with investor attention likely to gradually return to core business fundamentals, including DRAM/NAND profitability and 2027 HBM market share dynamics.