[Click eStock] "SK Networks, Core Business Maintains Strong Performance... Accelerating Turnaround"

[Asia Economy Reporter Lee Jung-yoon] Heungkuk Securities announced on the 3rd that it is initiating coverage on SK Networks with a Buy rating and a target price of 7,500 KRW, citing continued solid performance centered on its core businesses SK Magic and SK Rent-a-Car, and a quarterly earnings turnaround expected this year due to reduced losses at Walkerhill.

The earnings turnaround that began after the third quarter of last year has accelerated this year. The recovery in performance centered on the core businesses SK Rent-a-Car and SK Magic is viewed positively. Walkerhill, which suffered due to COVID-19, has returned to profitability, and operating profit generation from the Global and Information & Communications divisions is expected to contribute to a favorable performance in the second quarter of this year. Annual sales for this year are projected to decline by 8.8% year-on-year to 1.0515 trillion KRW, while operating profit is expected to increase by 45.2% to 177.1 billion KRW, indicating a decrease in scale but the possibility of solid earnings.

Additionally, SK Networks expanded its business capabilities through affiliate mergers over ten years since 1999 and entered new businesses through external mergers and acquisitions (M&A) starting in 2016. Park Jong-ryeol, a researcher at Heungkuk Securities, explained, "The current business structure was completed through the sale of underperforming business units," adding, "Recently, they secured 1.3 trillion KRW in cash assets through the sale of low-efficiency assets such as Bukbang Dong-eop and Jukjeon Logistics Center."

He continued, "They are seeking M&A opportunities to secure future growth engines," and stated, "With the current business structure, they have the capacity to generate 200 billion KRW in annual operating profit and 1 trillion KRW in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)."