[Click e-Stock] SK Telecom's Operating Profit Expected to Fall Below Market Consensus, Target Price Lowered

On July 9, Korea Investment & Securities maintained its "Buy" investment rating on SK Telecom but lowered its target price from 70,000 won to 61,000 won.

On this day, Kim Jeongchan, a researcher at Korea Investment & Securities, stated, "SK Telecom's operating profit for the second quarter is expected to be 333.2 billion won, which is 25% below the market consensus."

The operating profit estimate reflects 224.8 billion won in costs related to the information leak incident. This is because the cost of replacing USIM cards was recognized in the second quarter for all subscribers (about 24 million) at once. The costs related to subscribers who have not yet replaced their USIM cards are expected to be reversed in the second half of the year.

Following the announcement of the final results of the joint public-private investigation, which confirmed the possibility of penalty exemption, SK Telecom introduced a temporary penalty exemption (from April 19 to July 14), a 700 billion won investment in information security over five years, and a customer appreciation package worth 500 billion won, which includes a 50% discount on August bills and additional data for five months.

Kim commented, "Revenue deduction in the third quarter due to the bill discount and a decrease in wireless service revenue due to subscriber churn are inevitable. Additional expenditures are also expected in the second half of the year for information security investments and penalty refunds."

The remaining risks are the scale of subscriber migration by July 14 and whether a fine will be imposed around next month. Kim added, "Fortunately, the net subscriber outflow between July 5 and 7 after the penalty exemption measure was about 10,000, which is less than initially feared. Even if a fine is imposed, the likelihood of a dividend reduction is low. This year's dividend per share of 3,540 won (dividend yield of 6.5%) is expected to be maintained."