BNK Investment Securities raised its target price for SK Square(402340) by 28.6% to 1.8 million won from 1.4 million won. It said a short-term pullback is continuing amid recent SK hynix share-price volatility, but expectations for earnings improvement and expanded shareholder returns remain intact, adding that investors should be patient during volatile periods.
Kim Jang-won, an analyst at BNK Investment Securities, on the 10th maintained a "buy" rating on SK Square and raised the target price to 1.8 million won. The previous session's closing price was 1,327,000 won.
BNK Investment Securities analyzed that because SK Square's corporate value is effectively determined by the equity value of SK hynix, it is natural for the share price to move in the same direction as SK hynix.
Kim said, "As a pure holding company, SK Square does not have large assets other than SK hynix," adding, "Because control over SK hynix is both the asset value and the key investment point, the share-price correlation is inevitable."
In fact, the share of SK hynix's equity value in SK Square's market capitalization has been increasing every year, and the discount rate on the equity value has been steadily narrowing, according to the analysis. At the end of June this year, the discount rate fell to as low as 34%.
BNK Investment Securities expected the investment focus to expand from simple asset value to the ability to generate tangible revenue. With SK hynix signaling an annual cash dividend of 1,500 won per share and additional shareholder returns using 50% of free cash flow (FCF) for 2025–2027, it projected that SK Square will also have greater capacity for shareholder returns along with increased dividend income.
Kim said, "Shareholder returns at SK hynix will further increase SK Square's net cash, which will not only expand shareholder returns but also bolster capacity for new investments."
It also assessed the current valuation as still attractive. BNK Investment Securities said that even by applying a 35% discount to SK hynix's equity value and valuing the remaining equity value at book value, the resulting corporate value is about 20% higher than the current share price.
Kim said, "Expectations for earnings and shareholder returns remain valid," adding, "During highly volatile periods, it is necessary to focus on corporate value rather than short-term share prices and remain patient."