SK hynix Eyes ADR Listing to Close Valuation Gap with Micron

SK hynix (000660.KS) shares surged 3.71% to close at 587,000 won on Wednesday after the company disclosed it is considering listing its shares on a U.S. stock exchange through American Depositary Receipts.

The announcement sparked expectations that the ADR listing could help address SK hynix's valuation discount compared to U.S. rival Micron Technology. SK hynix trades at a price-to-earnings ratio of approximately 11 times based on expected 2024 results, significantly lower than Micron's 29 times, despite similar product portfolios and company size.

Meritz Securities set a target price of 910,000 won for SK hynix, saying the ADR listing could quickly narrow the valuation gap with Micron. An ADR listing would allow foreign investors to invest directly in dollars, broadening the investor base and raising the possibility of inclusion in the Philadelphia Semiconductor Index.

**K-Beauty Rally**

Goldman Sachs resumed coverage of the K-beauty sector, selecting APR Corporation as its top pick with a 12-month target price of 380,000 won and a buy rating. The target implies 50% upside from Wednesday's closing price of 252,000 won.

Goldman Sachs cited APR's rapid market share gains on global platforms through its Medicube brand, as well as its expansion of product categories and entry into new retail channels to build customer loyalty. The investment bank said Korea's beauty sector has entered a second boom cycle led by indie brands.

In contrast, Goldman Sachs maintained a sell rating on LG Household & Health Care (051900.KS), saying restructuring of the company's duty-free and China businesses is still in its early stages.

**Shareholder Activism Set to Rise**

Activist fund activity is expected to intensify at regular shareholders' meetings in March following a series of amendments to the Commercial Act under the new administration.

Securities analysts say undervalued companies with substantial cash holdings but passive shareholder return policies will become targets. According to LS Securities (078020.KS), activist campaigns from January to October this year totaled 21, about half of the previous year's level, but activity has resumed in the second half.

The introduction of mandatory cumulative voting and directors' fiduciary duty to shareholders is expected to accelerate activism at next year's annual meetings. With 51% of listed companies trading below a price-to-book ratio of 1 and half of those being net cash companies, pressure for increased shareholder returns is likely to grow. Analysts point to Samsung Electronics, Samsung C&T, LG Corp., Nongshim, and Daeduck Electronics as potential targets.

**China Inflation Data Shows Mixed Signals**

China's November consumer price index rose 0.7% year-on-year, the highest in 32 months since March 2023. The National Bureau of Statistics attributed the increase to food prices turning positive, with fresh vegetable prices rising 14.5% and fresh fruit prices up 0.7%.

However, the producer price index fell 2.2% year-on-year, marking 38 consecutive months of decline since October 2022. ANZ Bank's chief Greater China economist said the larger-than-expected PPI decline clearly shows China's deflation has not eased.

**Government Unveils Semiconductor Strategy**

The government announced plans to increase fabless semiconductor company revenues more than tenfold. President Lee Jae-myung presided over a semiconductor industry development strategy briefing on Wednesday.

The government plans to invest more than 700 trillion won through 2047 to build 10 new semiconductor fabs, maintain leadership in memory semiconductors including HBM, and concentrate R&D spending on AI-specialized chips.

Semiconductor executives raised concerns about power supply. Samsung Electronics Vice Chairman Jeon Young-hyun said 6 gigawatts of the 9 GW needed for the Yongin semiconductor complex has been secured. SK hynix CEO Kwak Noh-jung said 3 GW of 6 GW has been secured.

**POSCO Future M Plans Bond Issuance**

POSCO Future M plans to issue up to 500 billion won in public bonds in January, its first issuance in approximately 18 months since July 2024. The company will conduct demand forecasting on January 7 for 250 billion won in bonds with three-year and five-year maturities.

The proceeds are expected to be used for debt repayment, with 250 billion won and 200 billion won in bonds maturing in February and April, respectively. While the company maintains an AA- credit rating, concerns over potential downgrades have grown due to the prolonged slowdown in the electric vehicle market. Analysts suggest a potential rebound next year.