[Click eStock] "SKC, Continued Growth in Copper Foil Business... Expansion of Eco-Friendly Products"

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities analyzed that SKC's estimated EBITDA (earnings before interest, taxes, depreciation, and amortization) has been revised upward due to the normalization of the copper foil business (SK Nexilis) and the expansion of the high value-added product ratio in the film division. They also stated that the shipment volume of secondary batteries and related materials will increase this year, and the growth potential of the copper foil business will continue with the expansion of overseas new plants. Accordingly, they maintained a 'Buy' investment rating and raised the target stock price from 110,000 KRW to 150,000 KRW.

According to NH Investment & Securities on the 14th, SKC's operating profit for the fourth quarter of 2020 is estimated to be 51.6 billion KRW, a 71.6% increase compared to the same period last year.

It is explained that the copper foil business will record the highest operating profit among all divisions at 20.5 billion KRW. The copper foil business is operating at maximum capacity after the completion of #4 plant in the first half of the year, and plants #1 to #3 are being restarted after maintenance in the third quarter. As a result, sales increased in the fourth quarter and profitability improved. Plants #5 and #6 are under construction and are expected to be completed sequentially from the end of 2021.

In the chemical business, although the PO (propylene oxide) spread has expanded, operating profit is understood to have decreased compared to the previous quarter due to opportunity losses from scheduled maintenance. Since normal operations resumed from last December after maintenance, about 10 billion KRW of opportunity losses can be recovered from the first quarter of 2021.

In the film business, stable operating profit margins are maintained due to low raw material prices. However, in the fourth quarter, shipments decreased due to seasonal characteristics, and profits declined due to one-time costs such as bonuses and disposal of idle assets. Growth in next-generation products with resource-circulating films is expected, with expanded sales of 'heat-shrink PET' films, which facilitate PET bottle recycling, and 'eco-label' products that can be recycled without separating labels.

Researcher Hwang Yoo-sik said, "The target stock price of 150,000 KRW corresponds to a price-to-earnings ratio (PER) of 31.5 times and a price-to-book ratio (PBR) of 2.59 times based on the estimated 2021 performance," adding, "This is similar to the PER and PBR applied to related material companies considering the growth potential of secondary batteries for electric vehicles."

He added, "The copper foil business is emphasized as a core business, and considering overseas expansions and the high possibility of long-term orders, this is judged to be a reasonable level."