[Edaily Reporter Kim Kyung-eun ] On the 30th, DaishinSecurities lowered its target price for SK hynix(000660)from 3.9 million won to 3.2 million won, reflecting the stock’s discount to its intrinsic value. However, it maintained its “Buy” investment rating, citing long-term growth potential driven by the artificial intelligence (AI) memory cycle and the potential for increased shareholder returns.

Ryu Hyung-geun, an analyst at DaishinSecurities, stated in a report released that day, “The growth potential within the AI cycle remains valid.”

Ryu noted that, unlike in the past, the current memory market faces structural constraints on supply expansion. As the industry shifts to a production system centered on High-Bandwidth Memory (HBM), the expansion of DRAM production capacity (CAPA) is being limited; consequently, he projected that the global DRAM production growth rate in 2027 would remain in the low to mid-20% range.

On the other hand, he projected that demand for server DRAM would increase by more than 50% by 2027. Given that both customers and suppliers have inventory levels below normal, the analysis suggests there is a high likelihood that memory supply shortages will begin in earnest starting in August or September.

SK hynix’s long-term growth strategy was also evaluated positively.

“Since technical standards in the AI industry have not yet been fully established, cooperation with global customers is crucial,” he explained, adding, “At a recent event in San Francisco, we confirmed our success in strengthening long-term partnerships with key customers.” He went on to predict, “We will be able to simultaneously pursue the expansion of new data center businesses and the stabilization of memory earnings based on long-term supply contracts.”

He also highlighted the potential for increased shareholder returns as an investment point. He explained that SK hynix has already surpassed the 100 trillion won net cash target it set at this year’s annual shareholders’ meeting. Furthermore, he assessed that the company’s financial capacity has significantly expanded due to favorable market conditions, the sale of its stake in Kioxia, and the issuance of American Depositary Receipts (ADRs).

Analyst Ryu stated, “The conditions are now in place to pursue various shareholder return policies, such as share buybacks and cancellations, as well as special dividends,” adding, “Options such as expanding ADRs using treasury shares and allocating 50% of free cash flow (FCF) to shareholder returns could be considered.” He added, “The long-term growth strategy is highly likely to lead to sustainable shareholder return policies,” noting that “the current stock price is undervalued.”