[Click eStock] "SK Ino, Fundamental Improvement Through Financial Structure Enhancement"

Mirae Asset Securities stated on the 18th that SK Innovation is expected to see improvements in its fundamentals and cash flow along with financial structure enhancement through the absorption merger with SK E&S. The target stock price was maintained at 150,000 KRW, with a 'Buy' investment rating.

Previously, SK Innovation's board of directors decided to absorb SK E&S. The merger ratio was set at 1:1.19. SK, which holds a 90% stake in SK E&S, is evaluated to have focused on supporting SK On in this absorption merger deal.

Jinho Lee, a researcher at Mirae Asset Securities, said, "The merger between SK Innovation and SK E&S is expected to have a positive impact on SK Innovation's sentiment," adding, "The most important criterion when judging pros and cons, the merger ratio, is more favorable to SK Innovation than the market-expected 1:2."

The researcher added, "SK Innovation has gained the fundamental strength to endure until its performance, including SK On, improves, and we judged that the corporate value brought by SK E&S outweighs the shareholder value dilution caused by new share issuance," and stated, "SK E&S's annual EBITDA of 2 trillion KRW is expected to greatly help improve the financial structure."

He also explained, "We estimate SK E&S's corporate value to be around 6 to 7 trillion KRW, which will sufficiently offset the 35% shareholder value dilution rate caused by new share issuance."

The researcher said, "SK E&S plans to cancel 5.34 million RCPS held by KKR from the issued shares before the merger is completed," and noted, "One of the biggest concerns raised with the possibility of this absorption merger was the RCPS exceeding 3 trillion KRW."

He further explained, "Although SK E&S is merged to improve SK Innovation's cash flow, if cash flow is blocked by RCPS redemption starting in 2026, the meaning of the merger will be diminished."