[Click eStock] "SK Square Expected to Show Greater Share Price Momentum Than SK Hynix... Target Price Raised"

Target Price Raised from 350,000 Won to 450,000 Won

On December 29, NH Investment & Securities raised its target price for SK Square from 3.5 million won to 4.5 million won, citing expectations that the company will show greater share price momentum than its subsidiary, SK Hynix. The investment opinion remains 'Buy'.

Ahn Jae-min, a researcher at NH Investment & Securities, stated, "We reflected the share price increase of SK Hynix, which has the largest proportion in SK Square's net asset value (NAV), as well as the reduction in the discount rate." He added, "Compared to the rise in SK Hynix's share price, SK Square's share price is expected to be even more responsive." He went on to say, "Since November, the Korea Financial Investment Association has relaxed regulations to allow SK Hynix to be purchased in proportion to its market capitalization, but it is still difficult to increase SK Hynix's weighting above its market cap. Therefore, the strategy of increasing semiconductor exposure through SK Square remains valid. Taking this into account, we have lowered the holding company discount rate applied to SK Square's valuation to 35%."

SK Hynix, the key core subsidiary, continues to see strong demand for high-bandwidth memory (HBM) despite recent concerns over an artificial intelligence (AI) bubble. Ahn explained, "As was disclosed in Micron's earnings, both DRAM and NAND shipments and average selling prices are rising, so demand for all SK Hynix products remains strong." He added, "Accordingly, we expect the share prices of both SK Hynix and SK Square to rise together."

Active shareholder returns and regulatory easing are also positive factors. Last year, SK Square repurchased and canceled 200 billion won worth of treasury shares, and this year, it bought back 100 billion won worth of treasury shares and sold 450,000 previously held treasury shares last month. In addition, the company has decided to acquire an additional 100 billion won worth of treasury shares by February next year. Ahn forecast, "With the recent divestment of stakes in Dreamus Company and Incross, investment assets have been liquidated, and with the inflow of dividends from SK Hynix, cash assets are increasing. Therefore, treasury share buybacks and cancellations are expected to continue after 2026."

Benefits are also expected from the Fair Trade Commission's move to ease holding company requirements for advanced strategic industry companies in the semiconductor sector. Ahn said, "Subject to prior approval from the Fair Trade Commission and local investment, the mandatory ownership ratio for sub-subsidiaries in the semiconductor sector will be eased from 100% to 50%, and financial leasing operations will be allowed. As a result, both SK Square and SK Hynix are expected to benefit."