SK Stock Price Expected to Rise with Improved Financial Structure

On the 13th, Hanwha Investment & Securities issued a new report with an investment opinion of ‘BUY (new)’ on SK (034730), stating that the company is expected to improve its financial structure through asset sales and consolidation.

SK Report Key Contents

Hanwha Investment & Securities analyzed SK (034730), saying that the company is embarking on a full-scale rebalancing operation this year to minimize inefficiencies caused by overlapping investments and businesses. The company has assets scheduled for sale in the first half of this year of approximately KRW 4.6 trillion, which is a more than threefold increase in just half a year compared to approximately KRW 1.3 trillion at the end of last year.

The sale of SK Rent-a-Car was completed last August, and the company is currently in the process of selling SK Specialty as of September. The transaction amount for SK Specialty, estimated by the industry, is in the KRW 4 trillion range. If the asset sale is completed as planned, the financial structure of SK, the holding company, and its affiliates is expected to improve due to the abundant cash inflow.

Short-term Impact of the SK E&S Merger

Hanwha Investment & Securities stated that the merger between SK E&S and SK Innovation, scheduled for November 1, will have a short-term impact on SK’s financials. The dividend income that SK received from SK E&S is estimated to be about 347 billion won in 2021, about 568 billion won in 2022, and about 474 billion won in 2023, which account for about 47%, 55%, and 37% of the dividend income in the corresponding fiscal years, respectively.

Changes in SK’s Previous Target Price

Hanwha Investment & Securities recently set a target price of 195,000 won for this stock for the first time in a year. This target price is -14.6% lower than the average target price of 228,214 won for all securities companies over the past six months, but 2.6% higher than the lowest target price of 190,000 won for Hyundai Motor Securities among all securities companies.

SK Target Price Consensus Comparison

The overall consensus for SK’s target price has become more conservative compared to the last 6 months. The average target price of all securities companies over the past 6 months was 228,214 won, which is -11.0% lower than the average target price of 256,364 won over the previous 6 months.