Up 83% This Year but Still "Undervalued"... The Stock Poised to Climb Further [Weekend Money]

SK Telecom Leads Share Price Gains on Anthropic Investment
Growing Interest in Data Centers Could Trigger Sector Re-rating
Target Prices for SK Telecom, KT, and LG Uplus All Raised

Despite strong macroeconomic uncertainties such as the Middle East war and inflation, there is an outlook that Korea's three major telecom companies—led by SK Telecom, followed by KT and LG Uplus—will continue to function as dividend defensive stocks.

Yonhap News Agency

On April 18, Shinhan Investment Corp. projected first-quarter operating profits for SK Telecom, KT, and LG Uplus to be KRW 511.8 billion (down 9.8% year-on-year), KRW 517.3 billion (down 24.9%), and KRW 273 billion (up 6.9%), respectively, anticipating results in line with market expectations.

Kim Aram, a researcher at Shinhan Investment Corp., explained, "SK Telecom saw its subscriber base decrease by about 550,000 compared to last year due to a hacking incident. However, strong performance was recorded in the fourth quarter of last year thanks to voluntary retirement programs and rapid growth of its data center business." Kim also noted, "For KT, earnings improvement is expected in the second half of the year as the new CEO's leadership stabilizes, and for LG Uplus, expenses related to (security-related) USIM card replacements are not expected to be significant."

Shinhan Investment Corp. placed particular emphasis on SK Telecom, which has been leading the rise in share prices among the three telecom companies. Since the beginning of the year, SK Telecom's share price has surged by 83%, far outpacing KT's 22% and LG Uplus's 18% increases.

The market capitalization of SK Telecom is believed to reflect KRW 5–6 trillion of equity value from its investment in the US AI company Anthropic. Kim pointed out, "By the end of 2025, the equity value was KRW 1.4 trillion (based on a company valuation of USD 30 billion), so the current valuation appears to be factoring in a company value of KRW 1.4–2 trillion in advance." She added, "Further share price increases are interpreted as bets on either additional growth in Anthropic's corporate value or a sector re-rating (share price revaluation)."

She further analyzed that rising interest in data centers could be the key to a sector re-rating. In the US and Singapore, growing interest in data center assets has driven up the share prices of data center REITs, neo-cloud companies, and telecom operators, while there has been no significant share price increase in Korea.

Kim estimated that the three telecom companies hold a domestic data center market share of about 60–70%, and that their EV/EBITDA multiple is only 4 times, compared to 6–9 times for global telecom operators and mid-teens to over 20 times for data center assets. "If the investment value of data centers gains recognition, the Korean telecom sector may come to be seen as relatively undervalued," she noted.

Shinhan Investment Corp. raised its target price for SK Telecom from KRW 74,500 to KRW 98,000. It also increased the target prices for KT and LG Uplus to KRW 77,000 (up KRW 5,000 from the previous target) and KRW 21,000 (up KRW 3,000), respectively.

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