Yuanta Securities Korea on the 2nd said SK Square is seeing a clear uptick in the equity value and earnings of its subsidiary SK hynix. It maintained a "buy" (BUY) rating and raised its target price to 2.1 million won from 840,000 won. The previous session's closing price was 1,757,000 won.
Lee Seung-ung, an analyst at Yuanta Securities Korea, said, "Earnings growth centered on SK hynix is expected to continue clearly," noting, "With robust AI-oriented memory demand persisting, the company is poised to set a new annual record."
The consensus for SK hynix's net income attributable to controlling interests has been sharply raised to 223 trillion won this year and 316 trillion won next year, compared with the start-of-year consensus of 6.3 trillion won this year and 6.9 trillion won next year.
The analyst said operating profit is improving not only at SK hynix but also across key portfolio subsidiaries.
Tmap Mobility's mobility data business revenue in the first quarter grew 22% from a year earlier, driving overall top-line expansion and extending its improvement in earnings before interest, taxes, depreciation and amortization (EBITDA). SK shieldus also posted balanced growth in its physical security and cybersecurity businesses, recording first-quarter revenue of 559.1 billion won and EBITDA of 117.6 billion won excluding one-off factors.
The analyst said, "SK Square's subsidiary equity value has surged from about 9.9 trillion won at the start of the year to 37.5 trillion won now," adding, "In particular, as dividend revenue received from SK hynix is expected to increase significantly, expectations for expanded shareholder returns going forward remain very valid."
SK Square has pursued an aggressive shareholder-return policy since this year by adding cash dividends to its existing share repurchases and cancellations. It completed a 40 billion won share buyback by mid-May and decided at the end of April on an interim dividend of 1,550 won per share (total 204.3 billion won).
The analyst said, "Considering the total planned share repurchases of 110 billion won this year and the expected increase in dividends from SK hynix to be received, annual shareholder returns are likely to exceed market expectations," adding, "The turnaround in key portfolio results and the trend of boosting per-share value will likely continue for the time being."