[Click e Stocks] "SK D&D, Focus on Energy Business Growth Potential... Target Price Up"

Shinhan Investment Corp. on the 13th raised the target price for SK D&D from 34,000 KRW to 37,000 KRW, reflecting a revaluation of the energy business segment. The investment rating was maintained as 'Buy.'

Park Kwang-rae, a research fellow at Shinhan Investment Corp., explained, "Although a weak performance is expected in the fourth quarter this year, the target price was raised reflecting the revaluation of the energy business segment," adding, "The real estate business value was estimated at 424 billion KRW, and the energy business value at 400 billion KRW."

SK D&D's fourth-quarter performance is expected to fall short of market expectations. Park said, "SK D&D's fourth-quarter results are expected to record sales of 103.9 billion KRW and operating profit of 8.7 billion KRW, below market expectations (sales of 187.5 billion KRW and operating profit of 19.5 billion KRW). Similar to the third quarter, there are expected to be no projects recognizing operating revenue at the point of delivery in the fourth quarter. For projects recognizing revenue based on progress, due to early fixed cost burdens, a single-digit operating profit margin on a company-wide basis is expected, and the absolute scale of sales and operating profit is likely to be at the level of the second to third quarters of 2022."

He emphasized that attention should be paid more to the potential revaluation of the energy business rather than the weak fourth-quarter performance. Park explained, "Although it is somewhat disappointing that the last quarter's results before the split into SK D&D (real estate business, continuing entity) and EcoGreen (energy business, newly established entity) may fall short of market expectations, for investors in SK D&D's energy business growth, the possibility of valuation rerating as an energy-related company and partial mitigation of quarterly earnings volatility are not significant issues."

After the split, the newly established entity will have capital of approximately 200 billion KRW. Park said, "Considering that domestic listed energy-related developers are receiving valuation assessments with price-to-book ratios (PBR) above 2 times, the current net asset value alone should be recognized at a value of at least 400 billion KRW, regardless of future performance," adding, "Including the value of the real estate business, there is potential for the market capitalization to rise above 800 billion KRW."

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