[Click eStock] DS: "SK Target Price Significantly Raised to 630,000 Won After Treasury Share Cancellation"

DS Investment & Securities has significantly raised its target price for SK Inc. to 630,000 won following the announcement of SK Inc.'s plans to cancel treasury shares.

Suhyun Kim, a researcher at DS Investment & Securities, stated in a report on the 11th, “SK Inc. has abandoned all other options ahead of the Commercial Act revision and chosen the most direct way to return value to shareholders.” Kim explained, “Taking into account the increase in the value of its subsidiaries and the sustainability of active shareholder return policies, we are raising the target price from the previous 450,000 won to 630,000 won through an adjustment in the discount rate.”

On the previous day, SK Inc. held a board meeting and resolved to cancel all 14.69 million treasury shares, except those reserved for employee compensation. This amount represents about 20% of the total market capitalization, equivalent to 5.1575 trillion won based on the closing price on the day of the board meeting.

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Researcher Kim evaluated, “This is a scale of funds that can be used for large-scale M&A in future growth businesses such as artificial intelligence (AI), semiconductors, and bio, and considering the current net debt of around 8 trillion won, it could also be used for debt repayment.” He added, “The significant strengthening of financial soundness over the past two years through active portfolio rebalancing is also a factor behind this decision. Standalone net debt has decreased by about 2 trillion won over the past year, and the debt ratio has also improved.” Currently, SK Inc. is also pursuing additional asset sales, including SK Siltron.

Furthermore, SK Inc. shareholders are eligible for separate taxation benefits on dividend income. Kim noted, “Last year’s payout ratio is expected to be around 28%. The dividend per share (DPS) will increase from 7,000 won in 2024 to 8,000 won in 2025, meeting the requirement for an increase of over 10%.” He added, “The shareholder return package has been meticulously designed, including a more than 10% increase in per-share value and DPS resulting from the treasury share cancellation, and a payout ratio of 28%.”

In addition, SK’s share price is positively influenced by several factors: the sharp rise in SK Hynix’s stock price due to the semiconductor supercycle, which has driven up the corporate value of SK Square, raising the value of SK Square’s stake alone to 23.4 trillion won; and the fact that unlisted subsidiary SK Pharmteco has begun producing clinical active pharmaceutical ingredients (APIs) for Eli Lilly’s obesity drug development.

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