[Click e-Stock] "SK Plunges on Subsidiary Slump, Undergoing Rebalancing"

Restructuring Expected to Continue in the Second Half of the Year

SK Group's holding company, SK, saw its first-quarter results for this year plummet compared to the same period last year due to the poor performance of its subsidiaries. Financial structure improvement is also expected to continue throughout this year.

On May 28, Yuanta Securities resumed its analysis of SK, assigning a 'Buy' investment rating and a target price of 170,000 won. The previously suggested target price, last set in May 2023, was 330,000 won. The closing price the previous day was 140,000 won.

On a consolidated basis, SK posted sales of 31.23 trillion won and operating profit of 399.8 billion won in the first quarter of this year. Compared to the same period last year, sales decreased by 5.4%, and operating profit dropped by a staggering 72.8%. The standalone results were also weak, with sales of 787.5 billion won and operating profit of 176.2 billion won, down 36.3% and 70.5% year-on-year, respectively.

This was due to the poor performance of SK Innovation and a reduction in dividends as SK E&S was merged into SK Innovation. Unlisted subsidiary SK Siltron reported sales of 462 billion won and operating profit of 38 billion won, down 2.9% and 9.6% year-on-year, respectively. With inventory adjustments expected to ease in the second half, a similar pattern to last year's "low in the first half, high in the second half" is anticipated.

Materials CIC performed well, achieving sales of 90 billion won and operating profit of 19 billion won, up 14% and 31.4% from the first quarter of last year, respectively. The company achieved double-digit growth thanks to the expansion of new customers and improved productivity, a trend expected to continue going forward.

SK Pharmteco saw overall growth in its synthesis and CGT businesses due to increased utilization rates. Sales rose 38.3% year-on-year to 238 billion won, while the operating loss narrowed by 30.6 billion won to 40 billion won. SK C&C posted sales of 586 billion won and operating profit of 29 billion won.

Financial structure improvement within the group is expected to continue this year as well. In the first quarter, the sale of SK Specialty generated a disposal gain of approximately 2.6 trillion won, reducing standalone net debt to 8.1 trillion won from 10.5 trillion won at the end of the previous year. On May 13, SK announced plans to contribute SK Trichem, SK Resonac, SK Materials JNC, and SK Materials Performance to SK Ecoplant through in-kind contributions and a comprehensive stock swap. SK C&C also decided to sell its Pangyo data center to SK Broadband for 506.8 billion won.

Lee Seungwoong, a researcher at Yuanta Securities, explained, "The improvement in financial structure will continue into the second half of the year due to business and portfolio restructuring effects."