[E-Daily Park Jung-Soo Reporter] On the 20th, Meritz Securities assessed that the shareholder return plan announced the previous day by SK hynix(000660)—including the scale of the share buyback and cancellation, the timing of the announcement, and additional return measures—exceeded market expectations.
Kim Seon-woo, an analyst at Meritz Securities, stated, “SK hynix’s announcement of its shareholder return plan is quite positive in terms of the key principles of shareholder returns—namely, ‘timing, perception, and anticipation,’” adding, “The company presented effective measures to address its undervaluation at a time the market did not anticipate and even unveiled additional follow-up measures.”
On the 19th, after the market closed, SK hynix announced a shareholder return plan to repurchase 40 trillion won worth of treasury stock within three months and cancel the entire amount. This came earlier than the company had initially indicated on the 7th, when it had signaled an “announcement within the third quarter.” The company cited its assessment that its business competitiveness and cash generation capabilities were not sufficiently reflected in the current stock price as the rationale for the share buyback and cancellation.
Meritz Securities also highlighted the fact that the share buyback will be carried out intensively over a short period. Analyst Kim noted, “Investors were disappointed that no share price support measures were announced during the earnings conference calls amid the stock price correction that began in July,” adding, “The company is expected to drive the stock price higher by completing the share buyback in a concentrated manner within the three-month period it has set.”
In particular, the firm viewed the expansion of the shareholder return target—from “up to 50% of free cash flow (FCF)” to “at least 50% of FCF”—as a positive development. SK hynix is maintaining its three-year shareholder return plan through 2027, and Meritz Securities expects FCF in 2027 to increase significantly compared to this year and next year.
Meritz Securities estimated SK hynix’s FCF for 2027 to be between 250 trillion and 300 trillion won. Based on this estimate, even if 50% of FCF is allocated to shareholder returns, the total amount could reach 125 trillion to 150 trillion won. Given the company’s current market capitalization, this represents a shareholder return yield of over 10 percent; the firm predicted that if implemented primarily through share buybacks and cancellations, it could drive stock price growth.
The dividend policy is also expected to be further strengthened. SK hynix plans to announce new policies regarding basic and special dividends at its third-quarter earnings briefing scheduled for late October. Next year, the company also plans to introduce a reduced-dividend policy to help shareholders benefit from dividend income tax relief. The company anticipates that share buybacks and cancellations will account for a larger share of its future shareholder return policy than dividends.
Closing the price gap between SK hynix’s common stock and its American Depositary Receipts (ADRs) was also cited as a key factor for future stock price revaluation. Currently, there is a price disparity of approximately 40% between the common stock and the ADRs. The company is in discussions with relevant government agencies to expand the ADR share—which currently stands at about 2.5% of total shares—and to improve the convertibility between common stock and ADRs.
Analyst Kim predicted, “Through institutional improvements and an increase in the issuance of ADRs, we can drive not only a rise in the stock price of the domestic shares but also a re-rating based on qualitative improvements.”