Key Takeaways:
SK Hynix will buy back and cancel 40 trillion won ($28.6 billion) of shares, the largest such move by a South Korean listed company.
"The decision stems from the assessment that the company's intrinsic value, underpinned by its business competitiveness and cash generation capability, is not fully reflected in its current stock price," SK Hynix said in a regulatory filing.
The board approved the repurchase of 24.07 million shares, or 3.3 percent of total issued shares, based on the Aug. 18 closing price of 1,662,000 won. The buyback runs about three months from Aug. 20, with all acquired shares to be cancelled. The company also raised its shareholder return target to over 50 percent of cumulative free cash flow for 2025-2027, from within 50 percent previously.
Shares closed at 1.5 million won on Aug. 19, down 9.75 percent, after falling nearly 50 percent from a record 2.987 million won hit on June 25. US-listed shares rose more than 3 percent in after-hours trading after the announcement, having declined over 3 percent earlier in the session.
SK Hynix reported record second-quarter results, with revenue of 79.3187 trillion won and operating profit of 60.5426 trillion won. Net cash stood at about 69 trillion won at the end of the quarter. Analysts forecast operating profit of 267 trillion won this year, 392 trillion won next year and 399 trillion won in 2028, according to the company. Its market capitalization of 1,095.7385 trillion won is roughly in line with the operating profit expected over the next three years.
The buyback accelerates the shareholder return program announced in November 2024, which targeted returns within 50 percent of cumulative free cash flow over 2025-2027. The company said it would consider early execution if free cash flow rose meaningfully because of improved performance.
SK Hynix said it will pursue additional shareholder returns through a combination of buybacks, cancellations and dividends, with fixed and special dividends under consideration. Specific details on scale and execution will be announced at the third-quarter earnings release after board approval, taking into account cash flows, market conditions and distributable profits.
The buyback signals management's confidence in cash generation after record earnings, and the raised payout target could pressure memory-chip peers to follow. Investors will watch the third-quarter earnings release for details on additional returns.
This article is for informational purposes only and does not constitute investment advice.
