Pension Funds Focus on Buying Undervalued Stocks of SK Innovation and POSCO

Looking into January Shopping Cart

New Year Sees 1 Trillion Won Sell-off
SK Inno Records 134 Billion Won Net Purchase
SK On's Listing Uncertainty Resolved

Undervalued Despite This Year's Strong Performance
Selected 50 Billion Won Each in POSCO and LG Electronics

[Asia Economy Reporter Park Jihwan] Pension funds, which have been offloading sell orders worth up to 1 trillion won since the beginning of the new year, have been steadily buying stocks of SK Innovation, POSCO, and LG Electronics.

According to the Korea Exchange on the 18th, pension funds have sold a total of 988.6 billion won worth of stocks in the domestic market, including 795.6 billion won on the KOSPI and 193 billion won on the KOSDAQ, up to the previous day this year.

Despite continuing large-scale sell-offs, pension funds have net purchased SK Innovation stocks worth 134 billion won. The reason behind pension funds' concentrated buying of SK Innovation is the expectation that the company's value will increase due to the listing of LG Energy Solution and the introduction of regulatory measures on physical spin-offs by financial authorities. Kang Dongjin, a researcher at Hyundai Motor Securities, said, "Recently, financial authorities are reviewing regulations on physical spin-offs and subsidiary listings, increasing the likelihood of introducing shareholder protection measures for minority shareholders," adding, "This is seen as a factor that can resolve the holding company discount caused by concerns over the listing of SK On." Hyundai Motor Securities initially applied a 50% discount rate but reduced it to 20%, raising the target price from 260,000 won to 350,000 won, a 34.6% increase.

The listing of LG Energy Solution, which started general subscription from today, is also a factor that enhances the investment attractiveness of SK Innovation. The higher the corporate value of LG Energy Solution, which is expected to be a record-breaking success, the more the battery business unit value of SK Innovation, a fellow battery manufacturer, can be re-evaluated, brightening future prospects. After listing, LG Energy Solution's market capitalization is estimated at about 70.2 trillion won based on the confirmed public offering price, ranking third in the current KOSPI market capitalization.

Pension funds also added more than 50 billion won worth of stocks of POSCO and LG Electronics to their portfolios. These stocks share the common characteristic of being undervalued despite expected strong performance this year, having experienced significant declines last year. POSCO recorded its highest-ever performance last year but showed sluggish stock price movement due to concerns over a 'peak-out' in the steel industry in the second half. The stock price, which was around 410,000 won in May last year, is currently in the 280,000 won range, more than 30% lower. Park Seongbong, a researcher at Hana Financial Investment, said about POSCO, "Since high operating profits are expected to continue in the first half of this year, excessive concerns about a performance peak-out should be avoided," adding, "Following last year's 1 trillion won worth of share buybacks and the recent announcement of share cancellations, shareholder-friendly policies are being strengthened, but the current stock price is only about 0.5 times the price-to-book ratio (PBR)."

Last year, LG Electronics' stock price showed a high-start, low-finish trend. The stock price, which reached about 190,000 won in January last year, fell to 130,000 won by the end of the year. This is attributed to a sharp rise in stock price due to the Apple Car issue at the beginning of the year and a noticeable decline in operating profit toward the second half. However, this year, overall earnings are expected to increase compared to the previous year, while the stock price remains undervalued. Kim Unho, a researcher at IBK Investment & Securities, said, "LG Electronics' sales this year are expected to increase by 5.3% from the previous year to 64 trillion won," adding, "The current stock price is at a PBR of about 1.3 times, indicating an undervalued phase."

In addition, Hyundai Glovis (39.2 billion won), Hyundai Mobis (37.9 billion won), Hyundai Heavy Industries (33.1 billion won), Hyundai Mipo Dockyard (29.6 billion won), Samsung Fire & Marine Insurance (26.4 billion won), LG Display (26.4 billion won), Hanwha Solutions (26.2 billion won), and Meritz Financial Group (26 billion won) were among the top net purchases by pension funds.

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