SK Telecom, Solid Performance but Unrecovered Stock Price... Valuation Attractiveness Stands Out

[Asia Economy Reporter Oh Ju-yeon] Hanwha Investment & Securities evaluated SK Telecom by stating, "The first quarter earnings were solid, but the stock price has yet to recover to previous levels," suggesting that valuation merits could become prominent.

SK Telecom's consolidated first-quarter revenue was KRW 4.45 trillion, and operating profit was KRW 302 billion, which was assessed to be in line with market consensus.

Researcher Lee Soon-hak of Hanwha Investment & Securities analyzed, "The number of 5G subscribers increased by only 560,000 from the previous quarter to 2.65 million, causing MNO segment revenue to remain at the previous quarter's level. Although the total handset subscribers increased, the average revenue per user (ARPU) decreased by 1.4% compared to the previous quarter."

On the other hand, due to the impact of the novel coronavirus disease (COVID-19), overall operating expenses decreased, and accounting-based marketing expenses also dropped by more than KRW 50 billion compared to the previous quarter, offsetting the revenue sluggishness.

SK Telecom's second-quarter revenue is expected to be KRW 4.65 trillion, with operating profit of KRW 314.8 billion. It is explained that the COVID-19 impact is expected to continue through the second quarter, so similar to the first quarter, the growth rate of 5G subscribers will be moderate, and marketing expenditures will be limited.

Researcher Lee said, "Although subsidies for some devices were increased in early May, we believe there will be no overheated competition as in the past," and added, "The TiBroad merger was completed on the 30th of last month and will be reflected in consolidated earnings, so a slight improvement in performance compared to the first quarter is possible."

Accordingly, the investment opinion 'Buy' and target price of KRW 300,000 were maintained.

Researcher Lee stated, "It has been proven by the results that COVID-19 had little impact on the telecommunications industry, and rather, the media segment is benefiting from increased content consumption," adding, "In this situation, with the TiBroad merger completed, synergy effects through bundled products are also expected."

He said, "On the other hand, since the stock price that fell after COVID-19 has not yet fully recovered, there is room for further increase," and added, "With many 5G devices with reduced prices scheduled for release in the second half of the year, it is expected that 5G subscriber acquisition will accelerate."

This content was produced with the assistance of AI translation services.