[Click eStock] "SK Networks, 'Buy -> Hold' Due to Rapid Stock Price Surge, Limited Upside Potential"

On the 14th, Samsung Securities emphasized the need for the concretization and justification of the strategy behind the sharp stock price rise of SK Networks. Although the target price was raised by 6% from the previous level to 7,500 KRW, the investment opinion was downgraded from Buy to Hold considering the limited upside potential due to the recent rapid price surge.

Recently, SK Networks’ stock price surged as efforts to strengthen corporate acquisitions and collaborations aimed at evolving into an AI and robotics-centered business investment company, its low PBR (price-to-book ratio), and last year’s enhanced shareholder return strategy gained attention.

Jaeseung Baek, a researcher at Samsung Securities, stated, “While the increase in DPS (dividends per share) and share buybacks to strengthen shareholder returns are positive, to further enhance corporate value, it is necessary to first establish a company identity proven by performance and present a capital utilization strategy.”

SK Networks’ consolidated sales for Q4 increased by 5.4% quarter-on-quarter to 2.4 trillion KRW, and operating profit decreased by 7.9% to 50.5 billion KRW, with operating profit meeting consensus expectations.

With SK Magic’s home appliance division classified as a discontinued business, a loss of approximately 40 billion KRW was reflected, turning net income into a deficit. Considering the stabilization of quarterly operating profit at the 50 billion KRW level in 2023 and the recent divestment of the loss-making SK Magic home appliance division, it is analyzed that the operating profit trend in 2024 is unlikely to fluctuate significantly compared to 2023.

Recently, SK Networks signed a memorandum of understanding (MOU) with Bow Capital and announced plans to transform into an AI-centered business investment company through joint fund formation between its US investment subsidiary Highco Capital and Bow Capital. To this end, the company acquired a 2.6% stake in AI device company Humane for 22 million USD in March last year, 88% of data management company Encoa for 95.1 billion KRW in October, and a partial stake in AI solution startup Upstage for 25 billion KRW in January this year.

These moves clearly represent efforts to transform into an AI-centered business investment company; however, it is analyzed that more detailed pathways need to be presented to achieve strategic goals such as verifying capabilities in startup investments, methods to integrate AI technology with existing businesses, and whether to reduce net debt and focus investments through exits from existing businesses.

In particular, despite the increase in quarterly operating profit until Q3 last year, high net debt and rising interest expenses due to high interest rates resulted in a sharp decline in net profit. Researcher Baek said, “It is necessary to justify the corporate value beyond the recent stock price rise through the establishment of a company identity supported by performance and the concretization of capital utilization strategies.”

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