[Click E-Stock] "SK Networks’ Upstage Stake Value in Focus...Target Price Raised"

On September 7, Samsung Securities announced that it would maintain its "Buy" investment opinion on SK Networks and raise its target price by 19.5%, from 6,400 won to 7,650 won. The primary basis for this adjustment was the highlighted value of SK Networks’ stake in the domestic artificial intelligence (AI) startup Upstage. SK Networks currently holds an 11.7% stake in Upstage through the exercise of a call option and participation in its Series C funding round.

Jaeseung Baek, a research analyst at Samsung Securities, commented, "Upstage has established itself as one of the final three companies to pass South Korea's second comprehensive evaluation of independently developed AI foundation models," and added, "Reflecting the enterprise value assessed at the time of the Series C investment in May, we are raising the target price by 19.5%."

The value of the Upstage stake is already being reflected in SK Networks’ results. While SK Networks' operating profit in the first and second quarters this year met market consensus, its net profit far exceeded expectations, with 22.5 billion won in investment asset valuation gains recognized in the first quarter and 33.9 billion won in the second quarter as part of non-operating income. In the second quarter, operating profit was 6% above consensus, while net profit exceeded it by 155%. Notably, gains related to the Upstage stake accounted for a significant portion of the second quarter’s valuation gains.

The company's core business results were mixed. Profit from the hotel business remained robust, supported by increased inbound demand from foreign tourists, but profit declined in the information and communications business due to a decrease in mobile device sales, and in SK Magic (SK Intellix), the home appliance rental subsidiary, due to intensified industry competition.

Accordingly, the key point to watch in the second half of the year is whether the launch of new products will improve the information and communications business and whether competition in the home appliance rental industry surrounding SK Magic will ease. Analyst Baek noted, "While the value of the Upstage stake is expected to continue impacting SK Networks' corporate value for the time being, attention should be paid to whether SK Magic in particular will show visible signs of earnings recovery in the core business."

There was also a positive signal in terms of shareholder returns. SK Networks proposed an interim dividend per share (DPS) of 70 won for this year, an increase of 20 won from the previous year. This move is seen as a tangible sign of the company’s intention to return part of its investment profits to shareholders.

This content was produced with the assistance of AI translation services.