[Click eStock] "SKC, Industry Improvement from H1 Low... Investment Rating Down, Target Price Up"

Target Price Raised by 15% from Previous
Investment Opinion Downgraded from 'Buy' to 'Trading Buy'

Shinhan Investment Corp. raised the target price for SKC from 100,000 KRW to 115,000 KRW on the 24th, anticipating an improvement in the industry starting from the first half of the year and normalization of performance by 2025. However, the investment rating was downgraded from 'Buy' to 'Neutral (Trading Buy)'.

Lee Jin-myung, a researcher at Shinhan Investment Corp., stated, "We raised the target price by 15% reflecting the upward revision of the semiconductor materials multiple and the change in the timing of applying EBITDA before copper foil amortization." He added, "However, the investment rating was lowered to Trading Buy considering the slow recovery of fundamentals and the stock price strength driven by expectations for glass substrates, which resulted in a higher multiple compared to competitors." He further noted, "Nevertheless, we believe the expectations remain valid due to gradually improving core business performance and high growth potential of new businesses in the second half."

SKC recorded an operating loss of 76.2 billion KRW in the first quarter of this year, marking six consecutive quarters of losses. The researcher analyzed, "The secondary battery materials segment saw top-line growth due to increased copper foil shipments, but losses continued due to low utilization rates at domestic plants and ramp-up costs at the Malaysian plant. The chemical segment reduced its losses thanks to recovery in high-value-added PG sales volume and improved spreads, while the semiconductor materials segment posted an operating profit of 7.9 billion KRW, a 182% increase year-on-year, supported by strong performance from its subsidiary ISC."

Performance recovery is expected in the second half. The researcher forecasted, "Copper foil performance will normalize with improved profitability following increased sales volume after customer certification at the Malaysian plant, turning profitable in the fourth quarter. The chemical segment is expected to show a bottom-heavy performance due to spread recovery of major products amid market recovery, and the semiconductor materials segment is likely to see quarterly profit growth driven by increased sales of high-value-added rubber sockets from ISC and recovering demand for chemical mechanical polishing (CMP) pads."

Normalization of performance and visibility of new businesses are anticipated from 2025. The researcher predicted, "The core businesses (copper foil, chemicals) will improve from the first half as the industry recovers, with performance normalizing in 2025. From 2025, new businesses (glass substrates, PBAT, etc.) will become visible, gradually highlighting growth momentum."