More than KRW 20 trillion expected for treasury stock purchase
Expected total burnout within one to two weeks after acquisition
Disclosure of additional 3Q of additional reductions such as special dividends
The standard for the reduction of surplus cash flow will also be raised

The headquarters of SK Hynix in Icheon, Gyeonggi-do. [Reporter Han Joo-hyung] ė‚Žė§„ 확대 The headquarters of SK Hynix in Icheon, Gyeonggi-do. [Reporter Han Joo-hyung]

As SK Hynix decided to buy 40 trillion won worth of treasury stocks and incinerate them all, the stock market’s eye level is also rapidly increasing. Analysts say that the total shareholder return will exceed the previous forecast this year as the size of the purchase far exceeded market expectations and additional measures including special dividends are expected.

Hana Securities released a report on the 20th, saying, “SK Hynix’s acquisition of 40 trillion won in treasury stocks is clearly positive from the perspective of shareholders,” predicting that the size of shareholder returns this year will exceed original expectations. Hana Securities has estimated the total shareholder return at 40 trillion won to 60 trillion won this year and estimated the purchase size at 20 trillion won to 30 trillion won by halving the share purchase and dividend ratio. However, as the actual announced purchase amount alone reached 40 trillion won, the bottom of the previously expected total return was filled with one treasury stock purchase. Kim Rok-ho, a researcher at Hana Securities, said, “We believe that the additional reduction policy will be shared, so it will exceed the scale originally expected.”

SK Hynix will acquire a total of 40.43 trillion won worth of treasury stocks in the market from this day to November 19. Based on the closing price of 1.662 million won on the 18th, it is 2.47 million common shares, which is 3.3% of all issued stocks and 3.6% of the market capitalization as of the closing price of the 19th. The acquisition of the entire amount may be terminated earlier than the scheduled date.

What is noteworthy is the processing after the purchase. When the acquisition is completed, the company chooses a quick method of incinerating all of them within one to two weeks. This means that the purchase is aimed at retirement from the beginning, regardless of securing stocks related to bonuses for executives and employees. Incineration of treasury stocks is a representative means of return to increase the equity value of existing shareholders by reducing the number of distributed stocks, and unlike dividends that are only one-time cash payments, the number of issued stocks itself can be expected to improve earnings per share (EPS).

There are also dividend cards left. SK Hynix is considering expanding dividends, including special dividends as well as existing fixed dividends, and plans to disclose the specific scale and method of additional returns, including treasury stock purchases and dividends, when announcing third-quarter earnings after a board resolution. However, it plans to take a large portion of the total financial resources to acquire treasury stocks.

Mid- to long-term principles have also been strengthened. The company raised the standard to “more than 50%” this time to use 50% of its cumulative free cash flow (FCF) for three years from 2025 to 2027. This means that the mid-term reduction itself, which runs until 2027 as well as this year, could be larger than previous plans.

However, not all of the cash earned goes to shareholder returns. This is because the demand for advanced memories, including high-bandwidth memory (HBM), is increasing rapidly due to the expansion of artificial intelligence (AI) investment, and the burden of facility investment is also increasing. SK Hynix estimates that it should secure more than 100 trillion won in cash for investment and financial soundness, while Hana Securities estimates that it will accumulate about two years’ worth of facility investment (CAPEX) as cash equivalents.

The rapidly improved cash generation power is behind the simultaneous increase in shareholder returns and investment resources. Hana Securities predicted that SK Hynix’s FCF will surge from 25.8542 trillion won last year to 165.3741 trillion won this year and increase to 314.2697 trillion won next year. If the business continues to be strong, a structure will be formed in which considerable cash will remain even after large-scale facility investments are made.

Increasing shareholder value using the US Stock Deposit Certificate (ADR) is also a long-term task. Although the direction of expanding the current low proportion of ADR exchanges in the mid- to long-term is clear, the company plans to make a decision after consultation with related agencies as it is not an independent decision.

Market attention is now shifting to the scale of further reductions to be announced in the future. This is because if the special dividend is added at a time when the share buyback alone exceeds market expectations of up to 20 trillion won, the total shareholder return this year is likely to exceed the previous forecast of 60 trillion won.