SK Materials Boosts Performance Weight with New Subsidiary

Published 27 Nov.2020 10:03(KST)

[Asia Economy Reporter Eunmo Koo] The stock price of SK Materials has been on an upward trend since the beginning of this month. This is due to growing expectations of benefits from the localization of process materials following SK Hynix's acquisition of Intel's NAND business, as well as prospects for future earnings growth with the inclusion of a new subsidiary.

According to the Korea Exchange on the 27th, SK Materials' stock price closed at 260,000 KRW, up 0.19% (500 KRW) from the previous trading day. This marks six consecutive trading days of gains. SK Materials' stock price began to rebound after the Q3 earnings announcement on the 28th of last month, rising 20.8% through yesterday, nearly double the KOSDAQ's increase of 11.6% during the same period.

The upward trend in SK Materials' stock price this month is interpreted as a result of increased expectations for benefits from the localization of process materials following SK Hynix's acquisition of Intel's NAND business, combined with prospects for future earnings growth due to the inclusion of a new subsidiary. On the 20th of last month, SK Hynix signed a transfer agreement to acquire Intel's memory business unit, the NAND division, for $9 billion (10.3104 trillion KRW). SK Materials supplies semiconductor and display process materials, with its main products being specialty gases, industrial gases, and precursors.

The inclusion of the new subsidiary is also seen as a positive factor that raises expectations for improved earnings. SK Materials announced on the 24th that it established a joint venture (JV) called ‘SK JNC’ with the Japanese materials company JNC. SK Materials invested 24.4 billion KRW to acquire a 51% stake, and the JV will be consolidated as a subsidiary starting from the 10th of next month.

Through the newly established JV, SK Materials plans to participate in the organic light-emitting diode (OLED) materials market in addition to its existing semiconductor and display materials, seeking to expand its products and customer base. Jongwook Lee, a researcher at Samsung Securities, explained, “The expansion strategy through active mergers and acquisitions (M&A) continues. The strategy of selecting good technologies, expanding their applications, growing, and then returning profits through dividends forms the foundation for sustaining a high return on equity (ROE).”

Next year, a significant growth in NAND shipments is expected, and with continued sales growth from the new subsidiary and products, a favorable growth trend is anticipated. According to financial information provider FnGuide, SK Materials' operating profit next year is estimated at 286.5 billion KRW, a 20.8% increase from this year, marking a record high. Sales are also expected to rise 15.6% to 1.0891 trillion KRW, ushering in an era of sales exceeding one trillion KRW.