SK Hynix’s $28.8 Billion Buyback May Be Just the Start as Brokers See More Than $144 Billion in Shareholder Returns

Brokerages Call Shares Severely Undervalued

Shareholder Returns May Top $144 Billion by Next Year

Company Still Has Ample Room to Increase Investment Despite Large Payouts

Expectations Rise for a Re-Rating of SK Hynix

SK Hynix’s announcement of a 40 trillion won ($28.8 billion) share buyback and cancellation, the largest ever by a South Korean listed company, led brokerages to conclude that the chipmaker has the financial strength to fund shareholder returns and growth investment at the same time. Global investment banks said the move should help put a floor under the stock, while SK Hynix could be re-rated if it keeps its lead in high-bandwidth memory, or HBM, and sustains earnings growth.

Barclays, Nomura Strike a Positive Tone

Barclays said on Aug. 19 that SK Hynix’s 40 trillion won ($28.8 billion) buyback sends a strong signal that the stock is undervalued. Analyst Simon Coles wrote in a report that the company’s plan to return more than 50% of cumulative free cash flow from 2025 through 2027 amounts to about 15% of its market capitalization. Barclays maintained its overweight rating on SK Hynix ADRs and kept its price target at $300.

Barclays also highlighted that the company’s capacity to invest would not be damaged even after a payout of that size. Coles wrote that SK Hynix should still be able to meaningfully expand capacity over the next several years and invest in new opportunities while returning roughly 15% of its market value to shareholders. In other words, it can pursue both shareholder returns and capital spending at once rather than sacrificing one for the other.

SK Hynix changed its payout target from within 50% of cumulative free cash flow to more than 50%. It said it would combine regular dividends, special dividends and additional share buybacks, and would complete the 40 trillion won ($28.8 billion) repurchase over the next three months. Barclays said that should 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 increased its assumption for next year’s buybacks to about 200 trillion won ($144 billion), assuming 40 trillion won ($28.8 billion) of repurchases in each of the first three quarters and 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 positive view on industry conditions. Coles wrote that some major customers may cut memory content to cope with supply shortages, but there is little reason to expect the shortage to ease materially. That should support average selling prices. He also said SK Hynix is likely to retain its leadership in HBM and that he favors HBM exposure within the memory sector.

Nomura Securities also welcomed SK Hynix’s decision to carry out a large-scale buyback and cancellation. The firm said the stock is trading at 3.8 times expected earnings for this year and 2.8 times for next year, calling it "severely undervalued." It maintained its buy rating and its 4.7 million won price target.

Nomura said continued earnings growth driven by AI 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 could offer a chance to build positions.

Nomura forecasts SK Hynix’s free cash flow at 156 trillion won ($112 billion) in 2026 and 318 trillion won ($229 billion) in 2027. It estimates shareholder returns at 78 trillion won ($56.2 billion) and 159 trillion won ($114.5 billion), respectively. That implies total shareholder return yields of 7% in 2026 and 15% in 2027, based on the company’s market capitalization on Aug. 19.

“$28.8 Billion Is Only the Beginning”

Domestic brokerages went a step further, arguing that the latest decision is only the start of a much larger shareholder return cycle. With the AI memory boom sharply boosting cash generation, cumulative shareholder returns by next year could exceed 200 trillion won ($144 billion). Analysts focused in particular on the company’s decision to change its payout standard from within 50% of free cash flow to more than 50%, effectively turning the previous ceiling into a minimum.

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

The pace of the buyback will also be significant. There are 62 trading days in the three-month purchase period, excluding weekends and holidays. On a simple calculation, SK Hynix would need to repurchase about 645 billion won ($465 million) of stock a day on average. Brokerages said that sustained buying demand over three months should strongly improve trading flows. The stock responded immediately. According to Epic AI, 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 also say the latest share cancellation is not the end of the story. They expect cumulative shareholder returns from 2025 through 2027 to rise well above 200 trillion won as the AI memory boom greatly expands SK Hynix’s cash generation.

Samsung Securities forecasts cumulative shareholder returns of 220 trillion won ($158 billion) over the period, while Hanwha Investment & Securities sees 245 trillion won ($176 billion). NH Investment & Securities estimates next year’s free cash flow at 254 trillion won ($183 billion), while Samsung Securities puts it at 250 trillion won to 300 trillion won ($180 billion to $216 billion). Based on the company’s policy, more than half of that could be used for shareholder returns. Lee said that even excluding the 54.9 trillion won ($39.5 billion) already returned since 2025, additional shareholder returns equal to more than 15% of the current market capitalization could still follow.

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