[Click eStock] "SKT, Expected to Buy Back and Cancel 200 Billion Won of Treasury Shares This Year"

Hana Securities maintained a target price of 70,000 KRW and a 'Buy' investment rating on SK Telecom on the 30th, stating that trust will be restored through its shareholder return policy.

Researcher Kim Hong-sik noted, "Following 2023, SK Telecom continues to show the most stable earnings trend in 2024 as well. Although investor confidence has declined, there is a high possibility of share buybacks and cancellations this year, and considering the shareholder return yield, the stock is excessively undervalued."

He particularly highlighted June as a period of relatively high investment attractiveness and designated SK Telecom as the top preferred stock within the telecommunications sector this month.

He said, "Interest in telecom companies' shareholder return policies is increasing, and SK Telecom is recording the best shareholder return yield. Given the absence of earnings momentum in telecom companies, it seems necessary to focus on SK Telecom, whose shareholder return yield stands out."

He also expressed expectations that misunderstandings regarding the shareholder return policy, which have recently surfaced among shareholders, will be resolved. SK Telecom recently announced a mid-to-long-term dividend policy to pay out more than 50% of net income based on consolidated earnings. During the Q1 earnings conference call, the company also stated that investments for growth are necessary and that maintaining last year's shareholder return level would be burdensome.

Researcher Kim pointed out, "As a result, concerns among investors have grown that share buybacks and cancellations might be difficult in 2024, and that dividends might actually decrease based on this year's estimated earnings and payout ratio." He then explained, "However, even if short-term earnings decline, the dividend per share (DPS) at last year's level will be maintained, and although it may not reach the 300 billion KRW level, share buybacks and cancellations are likely to occur in 2024 as well."

He added, "Despite earnings stagnation, cash flow is expected to improve this year due to reduced capital expenditures (CAPEX). The consolidated dividend payout ratio of 50% is only a floor, and unlike in the past, there is no set ceiling. Given the current stock price and financing interest rates, reducing the number of shares through share buybacks and cancellations can be effective." He concluded, "We still believe that share buybacks and cancellations at the level of around 200 billion KRW this year are valid."