[Into the Stock] SK Materials Surpassing Target Price, Will the Unstoppable Momentum Continue?

Entering Battery Anode Material Business... 20% Surge in Four Days
Semiconductor Core Business Also Thriving... Expectations Rise for SK Leading Eco-Friendly Gas Business

[Asia Economy Reporter Ji Yeon-jin] SK Materials is showing unstoppable momentum in the KOSDAQ market. Following strong second-quarter earnings and news of its entry into the secondary battery materials business, its stock price has surged vertically. In recent days, securities firms have been raising their target prices for this stock one after another, with the stock price rising even more steeply than the target prices.

◆ Stock Price Surge Trigger = According to the Korea Exchange on the 22nd, SK Materials traded as high as 499,600 KRW during the day, up 16.89% from the previous day, setting a new 52-week high. It reached the target price range of 460,000 KRW to 500,000 KRW, which five securities firms had simultaneously raised just the day before, in a single day. As of 12:20 PM that day, the stock price had pulled back sharply but still showed a strong gain of over 3% compared to the previous day.

SK Materials manufactures and sells specialty gases (NF3, WF6, SiH4, etc.) and precursors (High-k, Low-k precursors, etc.) used in semiconductor and display panel manufacturing, as well as industrial gases (O2, N2, Ar, CO2, etc.) used across various industries. The company succeeded in the first domestic production of the cleaning agent NF3 (Nitrogen trifluoride), which extends semiconductor lifespan, and is the world's No. 1 producer in terms of NF3 and WF6 production volume and market share.

Since announcing its entry into the battery materials business on the 20th, the company has shown a rapid surge, recording a return of over 20% in just four days. It plans to establish a joint venture (JV) with the US-based Group14 in China to produce silicon carbon, which is added to anode materials. Silicon carbon is known to increase lifespan and improve efficiency and charging speed compared to conventional graphite anodes.

To this end, SK Materials will invest 60 billion KRW to secure a 75% stake in the JV. SK Materials is already the third-largest shareholder of Group14, owning 12% of its shares through an investment of 13 million USD (approximately 14.9 billion KRW). Construction is scheduled to begin this year, with mass production and sales planned from 2023. Park Sung-soon, a researcher at Cape Investment & Securities, said, "Secondary batteries, like semiconductor materials, have the advantage of having manufacturers within the group, which will be a strength for early market entry. Full-scale entry into the secondary battery market is expected to act as a factor for valuation expansion."

◆ Earnings Improvement and Expectations for SK Group’s Eco-friendly Stocks = The second-quarter earnings this year were also favorable. On a consolidated basis, sales reached 280.1 billion KRW, and operating profit was 68.1 billion KRW, exceeding the forecast (operating profit of 67.1 billion KRW). The increase in sales volume and average selling price of NF3 and WF6 led the earnings improvement. The third quarter is expected to see even more growth. Sales are projected at 303.4 billion KRW and operating profit at 79.8 billion KRW, as capacity expansions by customers will begin operating in the second half, gradually increasing volumes of specialty gases, industrial gases, and precursors. With the peak season for semiconductors and OLEDs, and the expansion effects of subsidiaries such as Showa Denko, Renewtec, and JNC being reflected, expectations are high for record-breaking earnings.

Do Hyun-woo, a researcher at NH Investment & Securities, said, "Due to the nature of the materials industry, which tends to lag behind semiconductor market conditions, earnings improvement is expected to continue in the second half," adding, "Memory semiconductor companies such as Samsung Electronics and SK Hynix have shifted to aggressive capacity investment strategies due to narrowing process technology gaps." Lee Jong-wook, a researcher at Samsung Securities, also said, "SK Materials benefits from the rapid growth of acquired business units such as SK Renewtec and SK Showa Denko. Starting from the third quarter, sales from OLED light-emitting materials acquired last year will begin to be reflected, so SK Materials’ growth is far from over."

Another additional momentum is that SK Materials has acquired technology from the Korea Institute of Energy Research to selectively absorb and capture carbon dioxide emitted from carbon emission sites, preparing for the mid- to long-term CCUS (Carbon Capture, Utilization, and Storage) business. Lee Kyung-min, a researcher at Hana Financial Investment, said, "The acquired technology is expected to create synergy with Renewtec, a SK Materials subsidiary engaged in carbon dioxide manufacturing," adding, "It is still unknown which SK Group affiliate will lead the eco-friendly gas-related business, but if SK Materials is expected to play a leading role in the gas-related value chain, its role will be spotlighted again."

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