Hana Securities said on the 9th that SK Telecom(017670)'s expansion of its data center business will become a mid- to long-term growth driver. If data center capacity increases to 1.5GW by 2032, related revenue could expand to 5 trillion won and operating profit to around 1 trillion won, it said.
It maintained an investment opinion of "buy (BUY)" and a target price of 140,000 won. The previous trading day's closing price of SK Telecom was 92,400 won.
Kim Hong-sik, a Hana Securities researcher, said, "Investors wonder how much SK Telecom's data center business can grow within a few years," and noted, "Assuming traffic increases 45% annually going forward, SK Telecom's total data center capacity will reach 1.5GW by 2032."
SK Telecom has recently been speeding up the expansion of its data center business. After establishing SK Hyper, a subsidiary directly in charge of the data center business, it plans to spin off its wireline subsidiary SK Broadband into SK Broadband and SK Horizon and expand the data center business.
SK Horizon plans to operate data centers totaling 318MW, including the ongoing Ulsan AIDC 100MW and Guro AIDC 75MW. SK Hyper plans to expand its domestic and overseas business to first increase the scale of the data center business to 5GW.
If SKT's data center business expands as planned, its contribution to earnings is expected to be significant. Kim said, "Optimistically, SK Telecom's data center revenue could reach 5 trillion won and operating profit could reach 1 trillion won by 2032."
Given that the current roughly 140MW of data centers generate about 500 billion won in revenue, a simple calculation suggests data center revenue could expand about tenfold. Assuming a similar operating margin is maintained, the operating profit contribution of the data center business in 2032 could reach about 1 trillion won.
It is also seen as positive in terms of shareholder returns. Considering the profit attributable to SK Telecom from the data center business, dividend resources could increase by about 500 billion won from the current level. This is an increase of about 67% compared with current dividend resources.
However, there are also views that the goal of expanding the data center business to 5GW is quite aggressive. Not a few investors are concerned about the financial burden from large-scale capital expenditures (CAPEX).
Hana Securities, however, assessed that SK Telecom's data center expansion is not a simple large upfront investment approach. Kim explained, "SK Horizon will move to expand centered on already determined data centers, and SK Hyper inevitably uses an SPC method that verifies profitability before investing."
Kim added, "Considering the traffic situation, 1.5GW by 2032 is a realistic figure," and said, "Given that this approach can increase dividends to shareholders while reducing investment burdens, the data center expansion could enhance SK Telecom's investment appeal."