Exterior view of the SK Seorin Building in Jongno-gu, Seoul. SK Group
Hana Securities raised its target price for SK Inc. (034730.KS) to 770,000 won from 560,000 won, a 37.5% increase, citing earnings improvements at its major affiliates and the potential for rising stake values. The brokerage also said concerns over an overhang — potential selling pressure — tied to SK Group Chairman Chey Tae-won’s divorce settlement would ease considerably.
Analysts Choi Jung-wook and Jung So-young maintained a “buy” rating on SK and lifted the target price to 770,000 won from 560,000 won on the 18th. The revision reflects higher stake values from share-price gains at major affiliates, along with the potential for further gains as SK hynix (000660.KS) and SK Innovation improve their earnings.
SK’s second-quarter consolidated revenue rose 39.9% year-on-year to 42.1 trillion won. Operating profit surged 2,205% over the same period to 4.8 trillion won.
Earnings improvements at major affiliates drove the strong results. SK Square posted second-quarter operating profit of 19.2 trillion won, boosted by record earnings at SK hynix, up 1,274% year-on-year. SK Innovation swung to a profit with second-quarter operating profit of 3.5 trillion won, compared with a loss a year earlier. SK Telecom’s operating profit rose 67.6% to 600 billion won, helped by a base effect from costs tied to last year’s cyberattack and growth in its artificial intelligence data center business.
Results at unlisted affiliate SK Ecoplant, however, fell short of expectations. Its revenue continued to grow, reaching 5.2 trillion won, but operating profit came to just 534 billion won. The shortfall reflected more than 200 billion won in losses in its solutions division tied to unsold homes at domestic projects.
Hana said overhang concerns over SK shares, raised in connection with Chey’s divorce settlement, would fall considerably. SK has agreed to sell its 47.32 million shares in SK Siltron to Doosan for 2.3 trillion won. The deal also includes a provision under which, if SK Siltron’s earnings before interest, taxes, depreciation and amortization (EBITDA) exceed annual benchmarks between 2027 and 2034, SK will receive additional proceeds equal to 28.2% of the excess EBITDA — calculated by applying its 70.6% stake to 40% of the surplus.
Applying the value of this deal, Hana estimated that the 29.4% stake in SK Siltron held personally by Chey is worth about 950 billion won. That is similar in scale to the 944 billion won divorce settlement set in the appellate retrial.
“If this stake is sold, in theory a substantial part of the settlement could be raised without disposing of SK shares,” the two analysts said. “The divorce matter will again come before the Supreme Court, so uncertainty remains until a final ruling, but overhang concerns tied to the possibility of an SK stake sale are likely to ease considerably.”
The roughly 400 billion won corporate tax burden that had been expected during the cancellation of treasury shares is also more likely to be resolved. SK plans to cancel all 14.69 million of its treasury shares, excluding 3.29 million set aside for employee compensation. That amounts to 20.1% of shares outstanding. The cancellation had initially been expected to trigger a corporate tax burden of around 400 billion won. However, this year’s tax reform bill includes a provision allowing deferred taxation when shares contributed in kind to a holding company — under a tax exemption — are converted into treasury shares and canceled during a merger, meaning the immediate tax burden can be avoided.
Hana said that because capital gains from the past in-kind contribution of SK Energy shares are currently being deferred, the deferral would continue as long as SK Innovation — the company that received the contribution — is not sold. Accordingly, it said the timing of SK’s treasury share cancellation, scheduled for next January, could be pushed back somewhat depending on when the tax reform bill takes effect.
