Is 40 trillion just an “appetizer”? The Hynix buyback landed ahead of schedule. Is 130 billion US dollars still ahead?
Source: Wall Street News
Editor: Dong Jing
Original title:Wall Street interprets Hynix's repurchase plan: shareholder return of up to 8% next year, and shareholder returns of at least $130 billion by 2027
Summary:
J.P. Morgan believes that the shareholder return policy was upgraded from “no more than 50% free cash flow” to “no less than 50%.”
The change from the upper limit to the lower limit sent a clear signal to the market: future shareholder returns will only be greater, not less.
Goldman Sachs predicts an 8% shareholder return in 2027, and expects an additional repurchase of approximately 7 trillion won in the future.
J.P. Morgan expects additional return of over 16% of its market value by the end of 2027. Follow-up focus will be on the results meeting at the end of October.
While the market is still debating the continuation of the AI storage cycle, and SK Hynix's stock price has plummeted since its June high,
The storage giant suddenly threw a bombshell on the market.
A historic repurchase that was implemented early reshaped the market's valuation logic for Hynix!
SK Hynix officially announced the market's long-awaited shareholder return policy after closing on August 19, 2026 —
Plan to buy back and write off value40 trillion wonShares, involving24.07 million shares(accounting for 3.3% of the shares issued as of the end of the second quarter of 2026),
About the equivalent of US dollars$289 billion. This scale is not only the largest share repurchase in the history of a Korean listed company,
It also surpassed the contract that Hynix raised through ADR financing in the US in early July this year$265 billion。
According to Chase Trading Desk, the two top Wall Street agencies, J.P. Morgan Chase and Goldman Sachs, both gave highly positive comments on the announcement in their latest research report on August 20.
J.P. Morgan believes that the shareholder return policy has been substantially upgraded since then“no more than 50%” was raised to “no less than 50%”,The policy ceiling became the policy floor.
J.P. Morgan said that following the announcement of a 40 trillion won (29 billion US dollars) share repurchase plan,
SK Hynix is likely to return at least $130 billion to shareholders by 2027.Goldman SachsThe shareholder return is forecast to be as high as 8% in 2027,
It is expected that there will be appointments in the futureAdditional repurchase of 7 trillion won.
Both J.P. Morgan Chase and Goldman Sachs maintain buying ratings: J.P. Morgan's target price2.75 million won(about 84% upside compared to the current price),
Goldman Sachs target price3.5 million won(Implied agreement133%upside space).
The next key catalyst is the third quarter results conference call at the end of October 2026, when the company will reveal a more complete roadmap for shareholder returns.
Analysts believe that this aggressive capital action directly proved to Wall Street that the company is “printing money” faster than market expectations.
For the stock price, which has plummeted 49% since its high on June 22,This not only completely counteracts the dilution effect of the recent ADR issuance,
Furthermore, the bottom of the valuation was established (the current annualized price-earnings ratio is only 3.8 times).
Repurchase scale: largest in history and implemented earlier than expected
J.P. Morgan analyst Jay Kwon clearly stated that the 40 trillion won repurchase announcement “landed earlier than expected” —
Previously, the market generally expected the announcement to be released around the end of September, but the company chose to directly disclose it after the market closes on August 19.
It shows the management's high level of confidence in the company's cash flow situation.
In terms of scale, this repurchase has multiple historical significance:
40 trillion wonIt is the largest share repurchase announced by a Korean listed company so far;
folding$289 billionHigher than the contract raised by Hynix in the US ADR in early July$265 billion，
This means that the company actually used repurchases to “hedge” the previous equity dilution;
This amount is equivalent to the rolling FCF (operating cash flow minus capital expenditure) for the past 12 months63%，
It is higher than the previous “no more than 50%” FCF allocation limit policy.
J.P. Morgan also pointed out that if you look at it from a valuation perspective,
What is the price-earnings ratio corresponding to Hynix's current stock price6.4 times(based on adjusted earnings per share for the past 12 months) or3.8 times
(Based on annualized adjusted earnings per share for the first half of 2026), this valuation level can be regarded as a reference benchmark for management to initiate repurchases.
Policy upgrade: from “ceiling” to “floor”
The core policy change in this announcement is that the shareholder return ratio is expressed from“Up to 50%(no more than 50%)
“Upgrade to“50% or higher(not less than 50%)”.
J.P. Morgan believesThis change in wording is a “substantial policy upgrade”, transforming the original upper bound into a lower limit commitment.
A clear signal was sent to the market: future shareholder returns will only be greater, not less.
The management also further clarified that
Non-operating income (such as income from the sale of Kioxia shares, cash outflows related to mergers and acquisitions, employee reward stock repurchases, etc.) is not included in the FCF calculation base.
This has further strengthened the transparency and predictability of the FCF's allocation policy.
J.P. Morgan also pointed out that in the past 8 months,
Hynix has made cumulative promises to cancel39.4 million shares(including the cancellation of 15.3 million shares announced in February 2026 and the cancellation of the current 24.07 million share repurchase),
It is the most aggressive of its memory peers.
Goldman Sachs: Shareholder return of 8% in 2027, target price of 3.5 million won
Goldman Sachs analyst Jerry Shen interpreted the announcement with a more aggressive attitude in the research report.
Goldman Sachs's core judgment is:The market underestimated Hynix's ability to generate cash flow.
Goldman Sachs predicts that the cumulative FCF will reach 25.2 trillion won from 2025 to 2027, and based on this forecast:
At this time40 trillion wonIn addition to the repurchase, there will be an additional repurchase of approximately 7 trillion won in the future;
After comprehensive calculation,Shareholder return will reach 8% in 2027;
Goldman Sachs raised its 2026-2028 earnings per share forecast by the highest10%；
Maintaining a buy rating, target price3.5 million won, implied about the current stock price (1,491 million won)133%upward space.
Goldman Sachs specifically emphasized that the early disclosure of this announcement itself is an important signal —“This proves that the company is printing money much faster than the market realizes”,
It also characterized this 40 trillion won repurchase as an “appetizer,” which indicates that there will be a larger return plan in the future.
J.P. Morgan Chase: Additional return space exceeds 16% of market capitalization by the end of 2027, with a target price of 2.75 million won
J.P. Morgan's calculation framework is relatively conservative, but the findings are just as impressive.
Based on J.P. Morgan's forecast, Hynix's cumulative FCF from 2025 to 2027 is47.5 trillion won。
In accordance with the “no less than 50%” distribution policy, after deducting the following announced items:
This time40 trillion wonBuyback/cancellation;
The lowest from 2025 to 20264 trillion wondividends;
Announced in February 202612 trillion wonshare cancellation;
J.P. Morgan analyst Jay Kwon expects to reach the end of 2027,
And at least18 trillion won (130 billion US dollars)The additional shareholder return space is equivalent to the current market valueOver 16%。
In his opinion,This will help inProviding support to the stock price after the recent sell-off。
In addition, J.P. Morgan also mentioned that the company is considering a new “value enhancement strategy” (including capital allocation and capital intensity targets).
It is expected to be revealed at the next key point after the third quarter results call.
J.P. Morgan StreetMaintaining an increase in holdings rating, target price of 2.75 million won(Corresponding to the average earnings per share from 2026 to 20277 timesprice-earnings ratio),
Thinking “the worst is over,” investors are advised to accumulate on dips.
Follow-up key catalysts: Three highlights to lock in the next two months
J.P. Morgan has sorted out the three key catalysts for the next few months:
Third quarter results conference call (before end of October):At that time, the company will disclose more complete shareholder return plan details.
J.P. Morgan is expected to include a special dividend arrangement;
HBM contract price update (before end of September):High-bandwidth memory pricing dynamics will be an important reference for judging the company's profitability;
US subsidiary listing plan update (next month):The progress of the listing of Hynix's US subsidiary will provide a new room for imagination in the operation of the company's capital.
According to J.P. Morgan Chase, Hynix's stock price has declined cumulatively since the high on June 22, 202649%，
Significantly outperformed its memory peers (down over the same period)26%) and the Korea Composite Index KOSPI (fell during the same period29%).
Factors that are dragging down stock prices include:The controversy over the sustainability of AI capital expenditure, the rapid spread of open source models,
Also, continued selling pressure caused by results falling short of expectations for the second quarter of 2026.
J.P. Morgan believesThis positive shareholder return announcement is expected to boost stock price sentiment in the near future.
Investors' focus is also expected to gradually return to core business fundamentals, including DRAM/NAND profitability and HBM market share dynamics in 2027.
Kwon said that the worst period is over, and it is expected that in the medium term, market sentiment towards SK Hynix will gradually improve, and investors are advised to increase their holdings.
(This article is not used as a basis for trading)
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