SK Hynix’s $29 Billion Buyback Is Just the Start, Analysts Say

Brokerages Call Shares Deeply Undervalued

Shareholder Returns Seen Reaching $145 Billion by Next Year

Company Still Has Ample Room to Increase Investment Despite Massive Payouts

Expectations Grow for a Re-rating of SK Hynix

Brokerages moved quickly to endorse SK Hynix Inc. after the company announced a 40 trillion won ($29 billion) share buyback and retirement, the largest such program ever by a South Korean listed company. The move showed the chipmaker has the financial strength to support both shareholder returns and growth investment, they said. Global investment banks also viewed the decision as a floor for the stock, while saying a sustained lead in high-bandwidth memory, or HBM, and continued earnings growth could drive a re-rating.

Barclays, Nomura Offer Positive Views

Barclays said on Aug. 19 that SK Hynix’s 40 trillion won buyback sent a strong signal that the stock is undervalued. In a report, analyst Simon Coles wrote that the company’s plan to return more than 50% of cumulative free cash flow from 2025 to 2027 amounts to roughly 15% of its market capitalization. Barclays maintained its overweight rating and $300 price target on SK Hynix’s American depositary receipts.

Barclays highlighted that the payout would not undermine the company’s capacity to invest. Coles wrote that SK Hynix should still be able to meaningfully expand production capacity over the next several years and invest in new opportunities even while returning an amount equal to about 15% of its market value. That would mark a break from the usual pattern in which larger shareholder payouts come at the expense of capital spending.

SK Hynix raised its shareholder return target from within 50% of cumulative free cash flow to more than 50%, and said it will combine regular dividends, special dividends and additional buybacks. It also announced that it will carry out the 40 trillion won repurchase program over the next three months. Barclays said the move should help support the stock’s downside.

The bank raised its forecast for next year’s quarterly dividend to 2,500 won a share and its year-end dividend to 10,000 won. It also lifted its assumption for next year’s buybacks to about 20 trillion won ($14.5 billion). Barclays assumes 40 trillion won ($2.9 billion) of buybacks in each of the first three quarters of next year, followed by a larger amount in the fourth quarter. On that basis, about 51% of cumulative free cash flow from 2025 through 2027 would be returned by the end of 2027.

Barclays also kept a constructive view on industry conditions. Coles wrote that some major customers may cut memory content to cope with supply shortages, but saw little reason for those shortages to ease materially. Average selling prices should remain supported. He also said SK Hynix is poised to maintain its lead in HBM and that he prefers HBM exposure within the memory sector.

Nomura Securities also welcomed SK Hynix’s decision to launch a large-scale buyback and retirement. The stock is trading at 3.8 times this year’s expected price-to-earnings ratio and 2.8 times next year’s, which makes it “severely undervalued,” Nomura said. It maintained its buy rating and 4.7 million won price target.

Nomura said continued earnings growth driven by artificial intelligence demand, a structural reduction in business risk through long-term contracts, and substantial shareholder returns could all lead to a re-rating of SK Hynix shares. It added that the current undervaluation may offer a chance to accumulate the stock.

Nomura projected SK Hynix’s free cash flow at 15.6 trillion won ($11.3 billion) in 2026 and 31.8 trillion won ($23 billion) in 2027. It estimated shareholder returns at 7.8 trillion won ($5.7 billion) and 15.9 trillion won ($11.5 billion), respectively. That implies total shareholder return yields of 7% in 2026 and 15% in 2027, based on the company’s market capitalization as of Aug. 19.

‘Even 40 Trillion Won Is Only the Beginning’

South Korean brokerages went a step further, saying the latest decision marks only the start of a broader shareholder return cycle. With cash generation surging on the back of the AI memory boom, cumulative shareholder returns through next year could exceed 200 trillion won ($144.9 billion), they said. They focused in particular on the company’s decision to shift its benchmark from up to 50% of free cash flow to at least 50%, effectively turning the old ceiling into a floor.

Lee Jong-wook, an analyst at Samsung Securities, said the scale and timing of the latest payout answered how strongly management believes in the durability of earnings. Ryu Young-ho of NH Investment & Securities said the policy should partly ease the market’s negative perception that SK Hynix has lagged global peers in shareholder returns. It should also make the stock’s downside more resilient, he added.

The pace of repurchases will also be substantial. There are 62 trading days in the three-month buying period, excluding weekends and public holidays. On a simple calculation, that means the company would need to buy back about 645 billion won ($467 million) of its own shares a day on average. With that buying demand set to continue for three months, brokerages expect a strong improvement in market supply-demand dynamics. The stock responded immediately. According to EpicAI, an AI-based investment information platform, SK Hynix closed at 1.691 million won on the day, up 12.73% from the previous session.

Brokerages are focused on whether the latest share retirement is only the beginning. They project that SK Hynix’s cash generation will expand sharply during the AI memory boom, pushing cumulative shareholder returns from 2025 through 2027 well above 200 trillion won.

Samsung Securities projected cumulative shareholder returns of 220 trillion won ($159.4 billion) over the period, while Hanwha Investment & Securities estimated 245 trillion won ($177.5 billion). NH Investment & Securities estimated next year’s free cash flow at 25.4 trillion won ($18.4 billion), while Samsung Securities put it at 25 trillion won to 30 trillion won ($18.1 billion to $21.7 billion). Based on the company’s policy, more than half of that could be used for shareholder returns. Lee said that even after excluding the 5.49 trillion won ($4 billion) already returned since 2025, more than 15% of the company’s current market capitalization could still be used for additional shareholder returns.

Kyung-joo Kang, Hankyung.com reporter qurasoha@hankyung.com