[Click eStock] "SK Telecom's Stock Expected to Rise Over 20% This Year"

Hana Securities has forecast that SK Telecom's stock price will rise by more than 20% this year. The firm maintained its "Buy" investment rating and a target price of 70,000 won.

Kim Hongsik, a researcher at Hana Securities, stated, "Concerns over weak earnings have been alleviated following the announcement of SK Telecom's fourth-quarter 2024 results." He added, "We expect operating profit growth to continue into 2025. Given the potential for long-term dividend increases and the outlook for interest rates, it is highly likely that the currently excessively high expected dividend yield will normalize, leading to a rise in the stock price."

In the fourth quarter of 2024, SK Telecom posted consolidated operating profit of 254.1 billion won, down 14% year-on-year and significantly below the consensus estimate of 345.3 billion won. This weak performance was mainly due to a sharp 20% year-on-year increase in labor costs, as large-scale voluntary retirement expenses were reflected in the fourth-quarter results.

Kim explained, "If not for these one-off costs, consolidated operating profit in the fourth quarter would have exceeded 300 billion won, which, considering seasonal factors, would be regarded as a solid performance." He added, "Despite a sharp decline in net additions of 5G subscribers, mobile service revenue continued to increase year-on-year. Furthermore, even with a rise in the number of mobile number porting cases, marketing costs decreased compared to the previous year, demonstrating a better-than-expected performance."

Kim recommended both short- and long-term buying of SK Telecom shares. He said, "Given current trends in mobile service revenue, marketing costs, depreciation, and labor costs, meaningful profit growth is expected in 2025 as well." He continued, "SK Telecom has occasionally fallen to second place in telecom sector market capitalization behind KT. In such instances, I recommend responding with staggered buying."

He added, "Considering that telecom companies' market capitalization is determined by long-term dividend outlooks, SK Telecom is still expected to maintain a higher market capitalization than KT for the time being." He concluded, "Assuming a 5% expected dividend yield is normal, a 20% stock price increase within the year is a reasonable expectation."