[Click eStock] SK, Reflecting Value of Unlisted Subsidiaries "Revaluation Expected"

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 24th that it maintains a buy rating and a target price of 380,000 KRW for SK.

Since the sharp decline in early 2021, SK's stock price has been moving within a range for a considerable period as the expected benefits from the restructuring of the governance following SK Telecom's spin-off have also diminished. In particular, even considering the holding company discount factors, the group has stood out through active investments at the group level, and the expected increase in the value of unlisted subsidiaries in the bio and materials sectors, which could drive revaluation, has not been reflected at all.

Recently, as many companies have spun off core business units through physical spin-offs and listed them, active discussions are ongoing in the political sphere regarding the issues of physical spin-off subsidiary listings and shareholder protection measures. The main issue in simultaneous listings of parent and subsidiary companies ultimately comes down to the conflict between controlling shareholders and general shareholders, which leads to governance issues. Recently, presidential candidates have also mentioned pledges such as "granting stock purchase rights to parent company shareholders" and "granting preemptive rights to parent company shareholders." Theoretically, spin-offs do not change corporate value, but demand tends to increase for direct investment in high-growth subsidiaries rather than holding companies, and the value of the holding company's shares in listed subsidiaries is generally discounted, which has led to declines in holding company stock prices in past cases.

Choi Jung-wook, a researcher at Hana Financial Investment, stated, "If the trend moves toward protecting the rights of minority shareholders in the future, the discount factors for holding companies could gradually ease," adding, "This could serve as an opportunity for the revaluation of holding companies."

Meanwhile, SK Pharmteco has continued its global expansion by completing three M&As: BMS's Swords plant in Ireland in 2017, AMPAC in the U.S. in 2018, and Yposkesi in France in 2021, as well as investing $350 million in CBM in the U.S. in January this year to become the second-largest shareholder. With this investment, SK Pharmteco is expected to become a global leading CDMO through the expansion of production bases. SK Pharmteco was the only Korean company to participate in the Private Track for unlisted companies at the JP Morgan Healthcare Conference on the 10th, gaining recognition for its investment value, and a pre-IPO is also planned for this year. In the materials sector, one of the group's four core businesses, SK secured growth momentum by absorbing SK Materials and raising funds. Additionally, SK Siltron, the nation's top wafer manufacturer, is expected to continue benefiting from increased demand in semiconductor and electric vehicle production.