[Click eStock] SK Networks, Earnings Recovery in Full Swing "Reevaluation Continues"

Heungkuk Securities announced on the 14th that it maintains a buy rating on SK Networks and raises the target price from 7,000 KRW to 8,000 KRW. This decision is based on the judgment that the stock price can continue to be re-evaluated due to the accelerated pace of earnings recovery and an active shareholder return policy.

SK Networks' consolidated sales for the second quarter are expected to increase by 8.4% year-on-year to 2.3 trillion KRW, and operating profit is projected to rise by 23.6% to 46.6 billion KRW. Although operating profit had shown a continuous decline trend every year since 2011, it is anticipated that from last year onward, operating profit and EBITDA will shift to an upward trend.

Jongryul Park, a researcher at Heungkuk Securities, stated, “Through profitability enhancement efforts in core businesses SK Magic and SK Rent-a-Car, the operating margin, which was lower compared to competitors, will be significantly improved.” He added, “Along with a substantial turnaround to profitability at Walkerhill, overall performance will be driven mainly by SK Magic and SK Rent-a-Car.” He further noted, “The information and communication and trading sectors will also generate improved profitability through cost efficiency measures.” Annual sales for this year are expected to increase by 4.5% year-on-year to 10.1 trillion KRW, and operating profit is forecasted to rise by 43.1% to 220.9 billion KRW.

Based on direct and indirect investment experience in various new growth business sectors, it is expected that performance creation through investment and exit, as well as shareholder returns, will continue in the future. Researcher Park evaluated, “Strategic investments are positive in that they can create synergies with existing businesses going forward,” and emphasized, “Although it has been much delayed compared to market expectations, anchor investments using funds from the sale of gas stations are also planned, and considering the global situation, it is judged that good investment opportunities can be captured.”

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