Can SK Hynix narrow the "Korea valuation discount" after landing on Wall Street?
SK hynix will launch this Friday The company's current valuation is at a significant discount compared to its industry peers. Listing on Nasdaq will allow SK Hynix to directly connect to the world's largest capital market. Global chip giant SK Hynix is listed on Nasdaq this Friday. This listing will test whether it can get rid of the long-standing "Korean valuation discount." "Korean valuation discount" refers to the market phenomenon in which the valuation of Korean companies is generally lower than that of global peers due to issues such as corporate governance and low transparency of chaebol group structures. This time, Hynix will be listed on Nasdaq through American Depositary Receipts (ADR), allowing it to directly connect to the world's largest capital market; industry experts have different opinions on whether this listing can narrow the valuation discount. London Stock Exchange Group (LSEG) data shows that even though SK Hynix occupies a leading position in the fast-growing high-bandwidth memory (HBM) market, its 12-month dynamic price-to-earnings ratio is only 4.8 times; the industry median price-to-earnings ratio is 29.84 times, and its U.S. competitors Technology trades at 6.6 times earnings. Rolf Bulk, head of semiconductor and infrastructure business at Futurum Group, said in an interview: "The listing of ADR is expected to narrow the valuation gap, but we do not think that the Korean valuation discount will completely disappear." Xavier Huang, a market analyst at multi-asset trading platform eToro, said the price-earnings gap between Micron and SK Hynix is mainly due to . For many years, U.S. institutional investment channels for Hynix have been limited. Even though its AI memory business is stronger, its valuation continues to be low. He said: "The rise in Hynix's stock price does not mean that the discount has narrowed. Even if the stock price rises, the valuation gap between Hynix and Micron has not narrowed." LSEG market data shows that Micron’s stock price has soared nearly 250% this year, and SK Hynix’s stock price has increased by 240%. Kim Peter, global investment strategist at South Korea's KB Financial Group, also believes that this listing will improve investment channels for overseas investors - there have been many obstacles for foreign investors to invest in the Korean stock market in the past. "The expansion of investment channels will make it easier for global funds to trade Hynix stock. Currently, the stock still has a valuation discount compared to the Korea Composite Index, Micron, and Samsung. Nasdaq listing is a key factor in narrowing the discount, and Nasdaq's strict listing standards can dispel some of the concerns of American investors." Nasdaq listing rules require companies to meet hard financial and liquidity thresholds, including minimum market capitalization, number of public shares in circulation, number of shareholders, stock price standards, etc.; at the same time, listed companies must comply with complete corporate governance regulations, covering multiple dimensions such as audit committees, independent directors, and shareholder voting rights. This ADR issuance is priced at US$149 per share, and the IPO is oversubscribed. The company expects to raise approximately US$26.5 billion. However, analysts believe that the value of opening up channels for U.S. investors will eventually exceed the amount of financing itself. Chi Ching, deputy director of S&P Global Ratings, said that the funds raised by this IPO will partially support the company's capital expenditures for production expansion; the company's average annual capital expenditures in the next two years are expected to be 50 trillion to 70 trillion won, but the vast majority of funds will still rely on the company's own operating cash flow. He added: "In the next two years, the company's average annual operating cash flow is expected to exceed 200 trillion won." Huang Xavier believes that listing will strengthen SK Hynix’s capital reserves for expansion and pave the way for more expansion in the United States, including stock buybacks, deepening investor communication, and further expanding the U.S. market. Can Hynix continue to lead? While the market is evaluating its Nasdaq listing, it is also waiting to see whether SK Hynix can maintain its leading position in the high-bandwidth memory (HBM) track, the core of AI acceleration. Philip Wool, chief fund manager of Reliant Asset Management, said that the explosion in demand for HBM has put SK Hynix into a "dilemma caused by success": the growth rate of market demand far exceeds its own production capacity. This gap has given Samsung Electronics and Micron an opportunity: the two companies have accelerated the deployment of similar competing products and signed supply agreements with major cloud manufacturers to help cloud manufacturers diversify their AI chip supply chains.
Futurum Group's Buerke judged that SK Hynix will still be the world's largest HBM supplier, but its market share will continue to decline: it was about 57% last year and dropped to about 50% this year; in the long run, as Samsung catches up and Micron consolidates its position as the third largest manufacturer, its market share will fall back to just over 40%. Compared with market share, the bigger challenge lies in production capacity construction. Bourque said: "The core of the market debate is not the level of share, but who can land sufficient production capacity to match the demand; even if each company has announced plans for new wafer fabs, the total production capacity is still not enough to meet the expected market demand before 2030."
Futurum Group's Buerke judged that SK Hynix will still be the world's largest HBM supplier, but its market share will continue to decline: it was about 57% last year and dropped to about 50% this year; in the long run, as Samsung catches up and Micron consolidates its position as the third largest manufacturer, its market share will fall back to just over 40%. Compared with market share, the bigger challenge lies in production capacity construction. Bourque said: "The core of the market debate is not the level of share, but who can land sufficient production capacity to match the demand; even if each company has announced plans for new wafer fabs, the total production capacity is still not enough to meet the expected market demand before 2030."