NH Investment & Securities on the 29th said that the favorable cycle in the semiconductor industry is likely to continue for the time being, and assessed that SK Square's appeal is rising in tandem. It maintained its "Buy" investment rating and raised its target price to 450,000 won from 350,000 won. SK Square's previous closing price was 334,500 won.
NH Investment & Securities explained that it raised the target price by reflecting the share-price rise of SK hynix, which accounts for the largest portion within net asset value (NAV), and the narrowing of the discount rate.
Ahn Jae-min, an NH Investment & Securities researcher, said, "Compared with the rise in SK hynix's share price, SK Square's price elasticity is expected to be higher," and added, "The Korea Financial Investment Association has applied deregulation from Nov. to allow purchases of SK hynix up to its market-cap weight, but it is difficult to overweight SK hynix beyond its market-cap weight, so the strategy of increasing semiconductor exposure through SK Square remains valid."
Taking this into account, the firm said it lowered the holding company discount applied to SK Square's valuation (price level relative to earnings) to 35%.
Despite recent concerns about an artificial intelligence (AI) bubble, demand related to high-bandwidth memory (HBM) remains strong for SK hynix. Ahn said, "With increases in both shipment volumes and selling prices for DRAM and NAND, demand for all of SK hynix's products can only be strong," and added, "Accordingly, we expect a tandem share-price rise for SK hynix and SK Square."
It also assessed that active shareholder returns are expected. SK Square bought back and canceled 200 billion won worth of treasury shares in 2024 and conducted a 100 billion won buyback this year. It also sold 450,000 treasury shares in Nov. It has decided to acquire an additional 100 billion won worth of treasury shares by Feb. 2026.
Ahn said, "The sale of equity stakes in Dreamus Company and Incross has led to the monetization of investment assets, and cash-like assets are increasing with the inflow of SK hynix dividends," and projected, "Accordingly, treasury share purchases and cancellations will continue even after 2026."
In addition, as the Fair Trade Commission introduces changes to holding-company regulations, it explained that SK Square and SK hynix are also expected to benefit as the commission pushes to ease holding-company requirements for advanced strategic industry companies in the semiconductor sector.