NH Investment & Securities on the 18th said SK is improving the group's financial structure and boosting management efficiency through asset sales and portfolio integration. It kept its investment opinion at "Buy" and raised its target price to 750,000 won from 465,000 won. SK's closing price in the previous session was 503,000 won.
Lee Seung-young, an analyst at NH Investment & Securities, said the target price hike reflects a rise in the value of investment assets such as SK Square. Lee added the discount to the target net worth (NAV) remains at 45%, noting SK's discount to NAV is about 62.8%.
It analyzed that SK is strengthening the linkage between its portfolio and the semiconductor cycle. On the NAV side, the share of SK Square in corporate value has expanded to about 54%, while on the cash-flow side, increased trademark royalty revenue driven by SK hynix's sales growth and stronger dividend income from future SK Square dividends are expected.
The improvement of the financial structure through asset sales is expected to enter the final stage within the year. The analyst said, "The main assets currently available for sale include SK Siltron and Watson, a Chinese copper foil maker," adding, "After the financial structure improves, the portfolio is expected to expand around artificial intelligence (AI), semiconductors and next-generation energy."
In the first quarter this year on a consolidation basis, SK posted revenue of 36.7513 trillion won and operating profit of 3.6731 trillion won. Those were up 19% and 760%, respectively, from a year earlier. In March, the company resolved to cancel 20.3% of its 24.8% treasury shares.
The analyst said, "Earnings growth at major unlisted subsidiaries such as SK ecoplant, SK pharmteco and SK Siltron, and stock gains at core subsidiaries such as SK Square, SK Innovation and SK Telecom are factors expected to lift the share price," adding, "After asset rebalancing, investment and shareholder returns are also expected to expand." By contrast, the prolonged weak performance at SK On was cited as a risk factor.