[Click eStock] "SK Reflects Subsidiaries' Business Improvement, Achieves Record High Performance"

[Asia Economy Reporter Ji Yeon-jin] IBK Investment & Securities forecasted that SK could see a significant improvement in shareholder returns as the performance of its affiliates increases.

Kim Jang-won, a researcher at IBK Investment & Securities, said, "SK has formalized share repurchases as part of its shareholder return policy," adding, "Considering the shareholder-friendly decision-making supported by solid performance, the current stock price level is disappointing."

SK recorded its highest-ever quarterly performance as the group's core businesses in refining, telecommunications, power generation, and advanced materials improved, and the enhanced profit factors were directly reflected in the results. In particular, attention should be paid to SK E&S and unlisted companies in the advanced materials sector in the first-quarter results. E&S benefited from a very favorable profit environment due to increased electricity demand during peak periods combined with a rise in the System Marginal Price (SMP) for electricity wholesale prices, and it is estimated that related profits also increased due to the rise in LNG prices.

The advanced materials business, consisting of Materials and Siltron, also recorded strong performance due to increased demand in downstream industries and rising product prices. However, there are concerns that the first-quarter situation may be difficult to sustain considering the volatility in product demand and prices over time. Electricity demand for E&S is low in the second quarter, and price adjustments may occur due to policy moves aimed at adjusting power generation costs. Nevertheless, based on global trends in oil and LNG, high price levels are expected to be maintained, and with electricity demand increasing again in the second half of the year, a favorable earnings environment is projected to continue.

Researcher Kim said, "Although the significance of the holding company's consolidated performance is inevitably indirect, it is not unrelated since the affiliates' performance serves as a preliminary indicator of the dividends to be received in the future," adding, "Especially in the case of E&S, where the holding company owns 90% of the shares and maintains a high dividend payout ratio, improved performance directly means an expansion of total dividends."

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