A 27% cut to SK hynix's target prices HBM4 as a two-supplier market

Viewed from the customer's income statement, the SK hynix revision stops reading as a memory call at all. LS Securities argues that an 80% HBM operating margin would push Nvidia to raise prices further to hold a gross margin of about 75% ^[10], and at a 75% gross margin cost of goods is a quarter of price, so each additional dollar of memory content needs roughly four dollars of list price to leave the margin where it was ^[4]. That is where the ceiling sits, in the buyer's capacity to pass the cost along before server budgets balk, which is the same reason the brokerage ruled out continued steep memory price increases even while expecting the shortage to persist ^[7].

The two revisions together change the relative valuation in a way the individual percentages do not show on their own. Before, the house's own targets implied SK hynix trading at 8.25 times Samsung's price (2.4 million against 400,000 was 3.3 million against 400,000, or 8.25); after, 5.33 times, a narrowing of about 35% in the relative valuation one desk puts on the two companies ^[1][1][2].

The evidence underneath the reallocation is one quarter of one ratio: HBM4 at about 35% of Samsung's HBM shipments in the second quarter against about 5% in the first, on LS's read of industry data ^[4], which is a thirtypoint move and a sevenfold one off a very small base ^[2]. Share of your own shipments is a different measure from share of the customer's socket, and the note is reasonably careful about that, resting the Samsung upgrade on production stability better than at HBM3E's first mass production ^[5] and on a base case of 1.0 to 1.3 times projected 2028 controlling-interest equity rather than an expanding multiple applied to growing earnings ^[8]. A price-to-book anchor four years out is a modest thing to say about a stock this crowded.

This is probably wrong in one direction or the other, and the note marks its own exits. Yields improve, costs fall, and SK hynix's HBM margin climbs back through 60% even with two qualified suppliers ^[12]; or Samsung's share stalls near a third of its own mix and major customers keep the second source as a negotiating instrument rather than a volume commitment, in which case the concentration premium LS expects to decay ^[14] simply does not. The cut took 900,000 won of target and none of the buy rating ^[1], which is the brokerage saying the demand line is intact ^[13] while the argument moves to who collects the rent.

Jung Woo-sung called it a process in which the competitive structure among suppliers is normalizing ^[15], a diplomatic way of putting it. For anyone signing a memory contract, the practical read is that a 20-point haircut to next year's expected margin, or rather a quarter of the forecast margin gone ^[3][9], is what a credible second supplier is worth, expressed in someone else's profit and loss, before a single order has actually moved.