[Click e-Stock] "SK Telecom, the Worst Is Over"

Target Price Raised to 59,000 Won
Continued Interest in Dividend and Low-PBR Stocks

On July 16, Shinhan Investment & Securities raised its target price for SK Telecom slightly from 57,000 won to 59,000 won, stating that "as long as interest in dividend stocks and low-PBR (price-to-book ratio) stocks continues, trading opportunities remain sufficient."

Kim Aram, a researcher at Shinhan Investment & Securities, analyzed, "Due to the recent share price increases of competitors, the shareholder return yield within the telecommunications sector has risen to 6.3%, the highest among peers (KT: 6.1%, LG Uplus: 5.9%). SK Telecom is also expected to benefit from the separate taxation of dividend income."

Kim emphasized, "The worst period is already over." He explained, "The only risk is a dividend cut, but SK Telecom has never experienced negative growth in its dividend per share since 2006. As of the first quarter of this year, the company holds 1.33 trillion won in standalone cash-equivalent assets and 2.23 trillion won on a consolidated basis. Even with additional borrowing, there would be no impact on its credit rating." He forecast the 2025 dividend per share to be 3,540 won, the same as the previous year, adding, "Even if a dividend reduction were to occur, the decision would likely be made at year-end or early next year."

Regarding SK Telecom's second-quarter results, Kim predicted an "earnings shock." He estimated sales at 4.29 trillion won and operating profit at 326.9 billion won, representing year-on-year declines of 2.9% and 39.2%, respectively. These figures are significantly below the consensus for operating profit (528.9 billion won). Kim explained, "The main reason for the earnings shock is the one-off cost of approximately 190 billion won related to USIM card replacements for all customers." The calculation for the USIM replacement cost is based on a USIM unit cost of 7,700 won and 25 million users, including both SK Telecom and SK Telecom network MVNO subscribers.

On marketing expenses, Kim said, "They are expected to remain similar to the previous quarter or increase slightly. Although new sales were suspended from May 5 to June 23, marketing efforts and compensation for existing subscribers and dealerships were strengthened." By segment, wireless revenue is expected to decrease by 1.8% year-on-year, high-speed internet revenue to increase by 2.1%, and the data center segment to continue its 20% growth trend.

Kim noted, "Although the trend of subscriber churn is stabilizing, weak performance is expected to continue through the third quarter due to factors such as the 50% discount on telecom fees in August." He projected third-quarter operating profit at 119 billion won, a 77.7% year-on-year decrease, and pointed out that depending on the intensity of marketing competition in the second half, the company could even post a standalone operating loss.