Performance tracking of the storage sector: A deep dive into the valuation of leading companies after a major rally

Based on the latest earnings reports and management commentary from Seagate and Hynix, the 'big storage' sector is in a more solid upward phase: high activity in the medium to short term is likely to continue. The next few key events may determine whether this trend will further 'accelerate pricing' — Samsung Electronics' earnings report on Thursday (the company has already provided preliminary guidance), Hynix's earnings call, and the post-market updates on Thursday.$SanDisk (SNDK.US)$ （（For more details, see the previous earnings preview article））与$Western Digital (WDC.US)$If these leading manufacturers continue to release positive pricing and supply-demand signals, it will serve as the next catalyst for the sector, potentially leading to a further upward revision of consensus expectations.

Valuation comparison: Currently showing a 'moat discount'

In terms of valuation, the upstream big three with the deepest moats are valued lower, especially Hynix and Micron, with forward P/E ratios around 10x. The market clearly still discounts them as 'strong cyclical products,' reflecting three main concerns – whether current high profitability is sustainable, whether their share of HBM/high-end DRAM might be challenged, and whether memory prices could fall from their current high levels.

By comparison, companies related to HDD and NAND/SSD have higher valuations (around 28–34x), reflecting the market's bet on two things: first, that the profit curve is still rising with better short-term visibility (for example, tight supply-demand balance in nearline HDD and stronger enterprise storage demand); second, under the broader structural growth driven by the explosion of 'context/data volume,' SSD demand elasticity and product mix improvements may lead to more sustained profit increases.

SK hynix: HBM remains a structural growth engine

Hynix's Q4 performance exceeded market expectations and continued to set a new quarterly record, with an operating profit margin reaching an astonishing 58%, improving by 11 percentage points quarter-on-quarter, and net profit surpassing 10 billion USD in a single quarter. Beyond the record-breaking results, the company believesAI demand is driving both HBM and server memory (including DRAM/NAND) upwards, positioning itself in official statements as an 'infrastructure partner for the AI era,' while emphasizing the mass production/supply capabilities of HBM3E and HBM4as its core competitive advantage.

Other key incremental information includes:

HBM remains the profit driver: The company disclosed HBM revenue more than doubled year-over-year, and emphasized that under the demand structure driven by AI, a high value-added product mix will be the core of the 2025 earnings breakout.

HBM4 and 'Custom HBM': The company officially stated: mass production preparation for HBM4 was completed in September last year, and large-scale production is proceeding according to customer demand. It also emphasized that Custom HBM will become a key differentiator.

The narrative of the 'Inference Era' is upgrading: The company predicts that as AI transitions from training to inference and distributed architecture expands, not only HBM, but also server DRAM and NAND will take on even more critical roles.

Capacity and the 'real constraints' of backend packaging: In the context of supply-demand imbalances, the official actions announced are: rapidly ramping up M15X production capacity, advancing the first fab in the Yongin industrial park, as well as the construction of advanced packaging facilities in Cheongju, South Korea, and Indiana, USA (integrating frontend/backend operations as part of 'supply capability').

Seagate: Tight supply-demand + upward trends in pricing/product mix driving margin expansion to the next level

Seagate's Q2 results were relatively less significant, with the key takeaway being the market-desired combination of tight supply-demand dynamics + an upward trend in pricing/product mixBrought aboutmargin expansion to the next level, andguidance explicitly extended the narrative on a 'prolonged shortage cycle': Management emphasized that production capacity for 2026 is largely locked in, customers are providing longer order visibility, and combined with the ramp-up of HAMR (Mosaic), the market continues to upgrade its perception of 'peak earnings power.'

Other key incremental information includes:

Products and customers: Nearline EBCapacity has been allocated through 2026. Long-term agreements with major cloud customers extend to 2027, with multiple cloud service providers discussing demand forecasts for 2028.

Price and margin trajectory: Prices per TB rose slightly this quarter, and management expects the uptrend to continue next quarter; they also mentioned revenue and EPS for the 2026 calendar year are expected to rise sequentially。

HAMR ramp accelerating: Mozaic 3 shipped approximately 1.5 million units during the quarter, completing qualification with U.S. hyperscalers; Mozaic 4 qualification is progressing and points to further scaling. Morgan Stanley emphasized that Mozaic 4 offers better gross margins, supported by mix shifts and pricing dynamics, which could drive continued margin expansion in 2H26/2027.

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