SK hynix Inc. (KRX:000660; NASDAQ:SKHY) saw its US-traded receipts climb 6.39% to $151.84 on Tuesday, as six brokerages initiated coverage with buy-equivalent ratings, underscoring Wall Street's conviction in the AI memory leader. The move widened the premium of the American depositary shares over the Korean common stock to 37.5%, a gap that highlights diverging valuations between the two markets.
Premium Analysis
In Seoul, the company's shares closed 0.64% higher at ₩1.577 million. However, after adjusting for the depositary ratio (one ADR equals one-tenth of a common share) and the exchange rate of ₩1,428.03 per dollar, the US listing implied a value of ₩2.168 million per common share—37.5% above the domestic price. This premium persists due to regulatory restrictions that prevent arbitrage: Korean rules prohibit the issuance of new depositary shares from domestic stock, leaving US investors with a one-way arbitrage window.
Analyst Optimism
Rosenblatt Securities set the highest price target at $320, implying 110.7% upside from Tuesday's intraday price. William Blair initiated with a $260 target (71.2% upside), while Stifel Financial Corp. (NYSE:SF) assigned $240 (58.1% upside). William Blair suggested that a US listing could allow SK hynix to "re-rate closer" to Micron Technology (NASDAQ:MU), though the 37.5% access premium remains a hurdle.
Earnings and Market Share
The bullish calls follow a mixed second-quarter earnings report. While revenue and operating profit hit record highs, both missed LSEG consensus estimates—revenue came in at ₩79.3 trillion versus ₩84 trillion expected, and operating profit at ₩60.5 trillion versus ₩64 trillion. Net profit surged to ₩93.9 trillion, boosted by investment gains of ₩63.3 trillion. Management cited strong demand, with President Song Hyun-jong noting that major customers are requesting more memory supply, and SK hynix has finalized about 10 long-term supply contracts, most spanning five years.
DRAM Market Share Concerns
Despite the AI-driven HBM leadership, SK hynix's overall DRAM market share fell to 26% in Q2, down 13 percentage points from a year earlier. Samsung Electronics (KRX:005930) reclaimed the top spot with 39%, while Micron gained to 25% and China's CXMT Corp. (SHA:688825) rose to 7%. This raises questions about the sustainability of the ADR premium, which currently reflects HBM strength rather than broad DRAM dominance.
Credit and Labor Updates
Moody's upgraded SK hynix's credit rating to A3 from Baa1, citing robust cash flow. Meanwhile, management and union representatives entered a fifth round of bonus negotiations without an agreement, according to Reuters.
Outlook
Investors will watch whether Seoul shares catch up to Tuesday's US rally. Key focus areas include the ADR premium trajectory, HBM4 shipment timing, and labor negotiations. Risks include a slowdown in AI infrastructure spending, further HBM4 delays, or increased Chinese competition, which could compress the premium. Conversely, tight supply or additional long-term contracts would likely support valuations.
