SK Group aims to boost SK ecoplant’s value with subsidiary integration

[Courtesy of SK ecoplant Co.]

SK Group plans to transform SK ecoplant Co. into a fast-growing artificial intelligence (AI) company by integrating SK materials airplus Inc. and Essencore Ltd., subsidiaries of SK Inc. into the group’s environmental energy arm.

According to investment banking and industry sources on Tuesday, SK Group decided to integrate the two subsidiaries with SK ecoplant to enhance SK ecoplant’s corporate value by leveraging synergies across growth sectors like AI and industrial gases.

Essencore is known as a manufacturer of DRAM modules and microSD cards sourced from SK hynix Inc.

It is also expected to integrate its semiconductor components into SK ecoplant‘s eco-friendly AI initiatives.

SK materials airplus specializes in high-purity industrial gases, crucial for SK ecoplant’s plant construction business, stored and supplied via tank lorries.

Analysts highlight the strategic alignment with SK hynix, a leader in AI memory chips like high bandwidth memory (HBM), reinforcing the capabilities of Essencore, SK ecoplant, and SK materials airplus in responding to AI industry growth.

SK ecoplant has diversified its portfolio beyond its construction origins into environmental and energy sectors through strategic mergers and acquisitions (M&A). In 2020, it acquired EMC Holdings and invested in 12 waste processing and recycling firms.

Despite these efforts, SK ecoplant has yet to achieve its 2023 financial targets of 850 billion won ($613.5 million) in earnings before interest, taxes, depreciation, and amortization (EBITDA) and 10 trillion won in enterprise value.

In contrast, Essencore and SK materials airplus have demonstrated profitability, with Essencore reporting sales of 821 billion won and an operating profit of 59.4 billion won in 2023 and SK materials airplus posting sales of 257.5 billion won and an operating profit of 65.2 billion won.

Both companies achieved an EBITDA of around 100 billion won last year, with a corporate value exceeding 1 trillion won.

The integration of these subsidiaries is anticipated to expedite SK ecoplant’s path to an initial public offering (IPO), potentially helping it meet listing requirements.

The consolidation could also drive SK ecoplant towards profitability, following its 2023 losses before income tax expense from continuing operations of 80.9 billion won and a net loss of 33.6 billion won.