SK hynix.

Fair value against price. On 15 October 2026 the Seoul price of ₩1,262,000 is 21.2% above our central value of ₩1,041,451. The ADS close of $147.55 on 14 October is 90% above the same value converted, $77.60. The gap is the ADS premium, not the business.

The business. SK hynix leads HBM and earned a 76% operating margin in Q2 2026.^S3S14 Memory remains a cycle: the ten-year mean margin is 24.7% and 2023 was a loss.^S1 The balance sheet is strong, with ₩152tn of net non-operating assets. The open question is the margin after 2027, when ₩61.5tn of committed capacity arrives.^S2

Open after four review rounds. The last round changed no input, but the round before moved the central value by 0.8%, so the two-round stability rule was not met within the four-round cap. Three items stay open: the KIOXIA share of the ₩85.3tn investment line (Unverified; the range is shown in section 04); the tax rate (24% used, statutory rate likely higher, Unverified, about −3% to −4.5% per share at 27.5%); and the discount-rate inputs (section 10).

What would change the view. Q3 results and 2027 contract terms on 28 October; any shipment of CXMT 4F² server modules; a change to the ADS conversion limit; the discount rate.

SK hynix makes DRAM, HBM and NAND in Korea and China. It lists in Seoul (000660) and, since July 2026, as ADSs on Nasdaq (SKHY).^S1 H1 2026 revenue was ₩131.9tn and operating profit ₩98.2tn.^S2

• Validated data. Financial figures come from SEC filings and company releases. Each figure states its source, period and whether it is reported or calculated by us. Conflicting sources are printed side by side.
• Classification first. The company is routed by the shape of its profit history before any valuation. Metrics that do not fit the class are named and not computed.
• Deterministic model. One script computes every value in this report from stated inputs. Prose numbers are read from its output.
• Blind multi-reviewer challenge. Reviewers saw the report without the conclusion and looked for omissions, errors and the strongest opposing case. Rounds stopped when two in a row left the value and the test unchanged.
• Signal strength. Strong: filings and official data. Medium: industry trackers. Weak: press reports, columns and platform data, kept in chapter 12.
• Your weights. The calculator in the Summary lets you set case weights. The conclusion shows which judgement it rests on.
• Compared with typical AI-written research. Typical output blends sources and states one target. Here every number has a source grade, the cycle is normalised by rule, and the price is reversed into the margin it requires.

How much of today's profit is a cycle peak, and how much is a new level that HBM and long-term agreements can hold?

SK hynix files with the SEC as a foreign private issuer under SIC 3674, semiconductors.^S13 It reports one segment.^S2 The company class follows the shape of its operating profit over ten years. Operating profit turned negative in 2023 and rose to ₩47.2tn in 2025.^S1S15S16 A sign change in the series routes the company to the cyclical class. We decided on operating profit, not net profit, because 2026 net profit includes ₩63.2tn of revaluation gains on financial instruments.^S2

Screen and check. The screen is the normalised operating margin on current revenue, next to price to tangible book. The check is the full-cycle return and the state of the industry capacity cycle.

Metrics we do not apply. The Faustmann ratio belongs to the profitable-industrial class only; here it reduces to price to book, and it is not computed. The current year is not a normal year. Average return on equity over five years is not used, because one memory cycle is longer. Median profit in won is not used, because revenue grew five-fold in ten years. Analyst forecasts are not used to date the cycle.

DRAM was 77.3% of Q1 2026 revenue and NAND 22.0%.^S1 SK hynix ranked first in HBM with a 56.4% share of Q1 2026 HBM market revenue, according to the tracker cited in the prospectus.^S1 The company states long-term supply agreements with about ten customers.^S45S46

Two trackers disagree on DRAM share

We do not average them. The periods differ, and the second tracker says SK hynix's ASP gain was limited by its high HBM bit share in Q2.^S28 We use the TrendForce figure for competitor shares, because it covers all named suppliers in one period.

Customers

The largest customer was 23.9% of 2025 revenue. The two largest were 14.8% and 12.4% in Q1 2026.^S1 In H1 2026 they were 13.35% and 13.03%, against 27.31% for one customer in H1 2025.^S2 Concentration has fallen. The filings do not name them. The prospectus says sales concentrate in the United States and China.^S1 Reports describe SK hynix as an Nvidia supplier.^S45 That the largest customer is Nvidia is our inference and is Unverified.

The annual operating margin moved from −23.6% in 2023 to 74.4% in H1 2026, about three years. Normalisation therefore uses margin, not profit in won.

We anchor the low case on the simple mean, because the weighted figure gives the HBM years most of the weight and so assumes part of the answer. The weighted figure appears as a sensitivity in section 09.

All values are reported by the company; margins are calculated by us. The 2020 operating profit is read from a release that states +84% on 2019; treat it as Unverified to the second decimal.^S21

Q2 2026 net profit of ₩93.9tn exceeded operating profit of ₩60.5tn. Finance income was ₩65.9tn, including ₩53.2tn of valuation gains and ₩10.0tn of dividend income.^S2 Coverage attributes most of this to the KIOXIA interest.^S45S46 We value operations from operating profit and add the investments once, at their reported fair value.

Cash includes cash, short-term instruments, short-term investments and long-term instruments at 30 June 2026.^S2 We deduct the ₩7.8tn deferred tax liability, which rose from ₩0.2tn with the revaluation gains, and the ₩32.0tn of current tax payable on H1 profit, because the cash flows start in H2.^S2 The ADS proceeds of ₩39.9tn arrived on 14 July, after the balance sheet date.^S4 At 31 March 2026 the KIOXIA-linked holdings were ₩6.6tn (SPC 1) and ₩13.6tn (SPC 2 convertible bond); SPC 1 sold its remaining KIOXIA equity in June.^S1 The half-year notes do not split the ₩85.3tn line at 30 June. The KIOXIA share price fell 57% from 30 June to 15 October (market quote). How much of the line follows that price is Unverified. The central case marks the ₩13.6tn SPC 2 bond, 16.0% of the line, to the share move; this proxy is Unverified because the 30 June split is not disclosed.

The ₩40.0tn buyback runs to 19 November.^S5 The policy returns over 50% of 2025–2027 free cash flow.^S6 H1 2026 finance expenses include ₩4.0tn of non-cash losses on exchangeable-bond derivatives, offset in equity.^S11 At market prices it is value-neutral, so we leave cash and the share count unchanged.

Capital spending was ₩8.3tn in 2023, ₩15.9tn in 2024 and ₩27.5tn in 2025.^S1 H1 2026 spending was ₩18.3tn.^S2 Coverage of the Q2 call puts 2026 spending in the high-₩40tn range; the exact figure is Unverified, and we use ₩47tn.^S46 Unrecognised capital commitments rose from ₩6.7tn to ₩61.5tn in six months.^S2 The board approved Y2 for ₩35.2tn, M17 for ₩19.1tn and P&T7 for ₩7.1tn.^S7S8S9

Capital spending averaged 26% of revenue in 2023–2025.^S1 The central and high cases use 25% after 2027; the low case uses 22%.

The company does not split maintenance from growth spending. Depreciation is our proxy, and it is labelled as such.

The incremental return is mostly price, not volume: the trackers report modest bit growth and large price rises.^S28 The H1 2026 annualised return of 107% is a peak figure, not a norm. No purchase-obligation stress is run, so no loss rate is used; the commitments are capital spending, which the cases carry directly.

SK hynix sold 177.9m ADSs at $149.00 on 9 July 2026, for $26.51bn gross.^S1 Ten ADSs represent one common share. The offering issued 17.79m new shares, which is 2.4% of the 728.9m shares outstanding after it.^S1S4 There was no over-allotment option. The prospectus says the company and certain affiliates may agree a 90-day lock-up from its date.^S1 By our count it ended about 7 October 2026. Whether any locked holder has sold since is Unverified. Three cornerstone investors indicated up to $7bn.^S1 The prospectus does not describe a lock-up for them.

Holders

SK square must hold at least 20% under Korean holding-company law, and this capped the offering size.^S1 On outstanding shares its stake is 20.04% after the offering and 20.73% after the buyback cancels 24.07m shares. The legal test uses issued shares including treasury shares, which gives about 20.00% and 20.68%, and headroom of about 24.1m shares.^S1S5

The premium is structural

The Korea Securities Depository was reported to cap conversion into ADSs at 2.5% of shares, and the offering used the cap.^S40 New ADSs can be created only after others are cancelled. The prospectus warns that a holder who withdraws shares may not be allowed to deposit them again.^S1S42

Rows one and two are as reported; row one uses the prospectus conversion rate of ₩1,538.05 (noon rate, 2 July). At the 9 July Seoul opening base rate of ₩1,509.90 in the KRX filing, the premium was 2.9%.^S1S4S41 Rows three and four are calculated by us.^S22S34S49 The 15 October premium compares a Seoul close with a later US intraday price. It overstates the like-for-like gap; we use the 14 October closes.

If the conversion limit were lifted and the premium closed through the ADS price, the ADS would move by that amount with no change in the business.

The Seoul shares fell for seven sessions to ₩1,262,000 on 15 October, down 11.06% on the day.^S22S23 That is 57.8% below the record close of ₩2,987,000.^S24 One source dates the high to 19 June intraday, another to 25 June at the close.^S24S25 A market-data series we checked shows a highest close of ₩2,919,000, which gives −56.8%. Both press sources agree on ₩2,987,000; the exchange record itself was not opened, so the level is Unverified within about 2%. Foreign investors sold a net ₩1.11tn of the shares on 15 October.^S22 Over five sessions the shares fell 26%, Samsung 22% and Micron about 11%.^S43

What did not change. No SK hynix filing since 19 August changes guidance, contracts or capacity plans.^S10S12 Two September 6-Ks answered press reports on a Solidigm pre-IPO raise and a Chongqing packaging stake sale; nothing was decided. Trackers still expect DRAM contract prices to rise 10–15% in Q4 2026 and HBM prices to rise in 2027.^S29S30 The Q3 report on 28 October is the next hard data.^S10

Three events in the week before the sell-off involve AI companies raising public money. We separate what they say about HBM demand from what they say about valuation multiples.

For SK hynix the demand channel works with a lag. Agreements and HBM allocation cover most of 2027.^S30S46 The multiple channel works at once, through the discount rate and the terminal margin the market will pay for. Our cases change the margin after 2027, not the 2026–27 demand.

Working capital is not released when revenue falls; in past downturns inventory rose.

The 10-year KTB yield is the 15 October close.^S33

All cases share H2 2026. Revenue is twice Q2, converted from the Q2 average of ₩1,501.93 per dollar to ₩1,342, with a 6% Q4 contract-price uplift: factor 0.947.^S51S52S29 Won costs stay at the Q2 level, so the H2 margin falls below Q2. Cash flows are discounted from 15 October: H2 2026 at 0.25 years, each later year at its year-end plus 0.21, and the terminal value at 9.21 years. Revenue grows 6% a year from 2030 to 2035 in the low and central cases and 8% in the high case, then 3% in the terminal value. The cases differ from 2027. Cycle repeats copies the 2019 and 2023 revenue falls of about one third and returns to the ten-year mean margin. Plateau holds 2027, then falls, and settles at 32%. New trend line treats HBM and long-term agreements as a higher floor, at 42%.

The beta of 1.3, the equity risk premium and the country premium are our assumptions. The ADS values convert the per-share value at the spot rate and carry no premium.

The matrix holds 2027 at +10% revenue and a 65% margin. It then sets the margin from 2029 (rows), with 2028 at the midpoint between 65% and the row margin, and the 2029 revenue as a multiple of 2025 revenue (columns). Values are per share in thousands of won; bold cells are at or above the ₩1,262,000 close.

At the ten-year mean margin of about 25%, no column reaches the price. At a 35% margin the price needs 2029 revenue of about 3.1 times 2025, or ₩304tn; at 40%, about 2.6 times, or ₩252tn (interpolated). The 2026 estimate is ₩282tn; no year before 2026 exceeded ₩97tn.

Each round gave independent reviewers the report and the source list without the conclusion, the case names or our open questions. One reviewer looked only for omissions that could change the conclusion. Others argued the strongest positive and negative case and rechecked numbers against sources. A finding seen in one round only is treated as a hypothesis.

This chapter holds context that is not evidence. It does not move the cases.

• A Seoul column argues that memory oversupply starts in 2029. It is opinion.^S44
• A Korean industry figure argues that more capacity lets Korean makers win back price-sensitive share from Chinese suppliers.^S50
• US bonds of a large GPU cloud provider traded near 77 cents on 14 October, according to a market report.^S48 Credit stress at one buyer is not a demand fact for HBM.
• Chief executives of two large chip companies named financing costs as a constraint on AI spending.^S47
• US export-control licences for the Chinese fabs and chip tariffs are listed as risks in the prospectus; we did not size them, and their effect is Unverified.^S1
• SK hynix is reviewing more production bases, including Japan; nothing is decided.^S12

Level 1 is a regulator or official dataset, 2 audited or reviewed accounts, 3 company releases, 4 industry trackers, 5 independent press, 6 platform signals. Conclusions rest on levels 1–3; levels 4–6 set context and are graded in the text.

A1. Annual forecasts, ₩tn

A2. Valuation outputs

A3. Base inputs and provenance