Heungkuk Metaltech Securities said on the 24th that SK is expected to be re-rated on rising subsidiary equity value and an earnings turnaround. It maintained a "Buy" investment opinion and raised the target price to 1 million won. SK's previous trading day closing price was 705,000 won.
Heungkuk Metaltech Securities projected that SK will see a sharp increase in earnings this year thanks to strong results at SK Square and contributions from SK Innovation and SK Telecom.
Park Jong-ryeol, a Heungkuk Metaltech Securities researcher, said, "It will be the first year of a full-fledged earnings turnaround," adding, "With solid earnings momentum (upward driver) and expanded shareholder returns, a re-rating of the stock is expected to be sustainable."
Strong second-quarter results were also projected. For the second quarter on a consolidation basis, SK was expected to post 31.1 trillion won in revenue and 3 trillion won in operating profit. Revenue would be up 3.3% from a year earlier, and operating profit was forecast to swing to a surplus.
Park said this is because SK Square and SK Innovation are expected to log a solid growth trend in results, adding that most subsidiaries, including SK Telecom, SK Networks, and SKC, will show a steady earnings trajectory.
In particular, SK ecoplant's results were said to be on track for a sharp improvement in operating profitability as the share of high-margin semiconductor business increases.
Notably, while sluggish performance persisted through last year, this year is projected to allow for a major earnings turnaround.
This is because SK Square, SK's key subsidiary, is expected to see a sharp earnings increase on strong equity-method gains at SK hynix, while SK Innovation and SK Telecom are also on an improving earnings trend.
Park said, "Most subsidiaries are also likely to see gradual earnings improvement," and noted a revised outlook for SK's full-year revenue on a consolidation basis at 131.1 trillion won and operating profit at 18.1 trillion won this year. These represent increases of 7% and 1,295.1%, respectively, from a year earlier.