Daily Brief South Korea: LG Chem Ltd, SK Inc, Ecopro BM Co Ltd and more

In today’s briefing:

Solactive Lithium Review Results Out: Key Takeaways
SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance
Alpha Generation Through Share Buybacks in Korea: October 2022

Solactive Lithium Review Results Out: Key Takeaways

Despite the WATCH list’s confusion, LG Energy Solution replaced LG Chem. In addition, Solactive excluded Iljin Materials, evidently due to its float-adjusted market cap size.
There are some somewhat elusive additions. The most prominent example is Japan Steel Works, which replaced LG Chem in the updated WATCH list at the last minute.
There was confusion about LG Chem’s deletion until the last minute, so, likely, the market has not sufficiently reflected this rebalancing factor in LG Energy/LG Chem’s LONG/SHORT.

Our base case target price of 276,567 won suggests a 37% upside from current levels for SK Inc. Our base case valuation assumes a 30% holdco discount.
At DPS of 8,000 won, this would represent dividend yield of 4% at current price of 202,000 won.
The three largest holdcos/quasi holdcos in Korea which include Samsung C&T, SK Inc, and LG Corp have strongly outperformed KOSPI this year.

The sharp decline in the Korean stock market this year has led to more Korean companies conducting share buybacks.
As of 23 October, the number of companies in Korea seeking share buybacks in Korea increased by 41% YoY with 308 companies announcing share buyback programs.
In the past month, some of the larger market cap companies including Ecopro BM and SKC that have announced share buybacks have significantly outperformed the market.

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