SK specialty Co., Ltd.

SK Specialty has existed as a separate legal entity only since 1 December 2021, so its FY2021 accounts cover one month: revenue of KRW 65.7 bn, operating income of KRW 10.4 bn, net income of KRW 5.8 bn and EBITDA of KRW 18.2 bn (Korea Investors Service). Full-year history starts in FY2022. Before that, the business was reported inside the listed SK Materials together with industrial gases and other businesses, so those figures are not comparable.

Income statement

Sources: Korea Investors Service rating report, June 2025 (FY2022); FY2025 business report (FY2023–FY2025).

Source: Korea Investors Service (June 2025). FY2025 EBITDA is not publicly disclosed. Gross profit is not publicly disclosed for any year, and diluted EPS equals basic EPS because there are no dilutive instruments.

Revenue fell at a compound rate of 3.8% a year from FY2022 to FY2025. It grew at 4.8% a year from the FY2023 trough.

Commentary. The FY2022 peak reflected record memory and display capex after the pandemic, tight NF3 supply and strong pricing. FY2023 was the memory downturn: DRAM and NAND makers cut wafer starts by double digits, chamber-cleaning gas volume fell with utilisation, and revenue dropped 19% while operating income fell 36%.

The FY2024–FY2025 recovery was volume-led and uneven. Revenue rose 3.9% and then 5.8%, helped by exports and HBM-driven DRAM demand. Operating income kept falling because of three factors:

1. Higher raw-material costs (AHF, tungsten powder) and a weaker won raised the cost-of-sales ratio.

2. SG&A rose, including a step-up in R&D to KRW 12.3 bn in FY2024.

3. FY2025 absorbed one-off costs tied to the change of control. Q1 2025 posted an operating loss of KRW 40.2 bn because of special employee payments related to the sale.

Excluding that one-off, FY2025 underlying operating income would have been around KRW 125 bn, close to FY2024. Momentum turned clearly positive late in the year: Q4 2025 revenue rose about 30% and operating income about 73% year on year.

Net income has trailed operating income by more than usual. In FY2024 other non-operating expenses rose by nearly KRW 50 bn and interest costs climbed with leverage, leaving net income down 61.6% at KRW 31.8 bn. FY2025 net income recovered to KRW 41.9 bn as non-operating charges normalised.

Balance sheet

Source: FY2025 business report. Net debt is borrowings and bonds minus cash.

Net debt was KRW 614.7 bn at 31 March 2025 (Korea Investors Service). The company's own net-debt-to-capital measure fell from 61.72% in FY2024 to 57.60% in FY2025. Korea Ratings gives a debt-to-assets ratio of 56.1% and net debt/EBITDA of 3.1x at end-FY2024. Goodwill and intangibles are not separately disclosed and are immaterial for a business that was carved out at book value. Working capital is not publicly disclosed.

Commentary. The balance sheet carries a heavy load from the expansion programme of 2021–2023, when PP&E peaked at KRW 901 bn, and from debt left in the company at the carve-out. Hahn & Co cut its acquisition financing from a planned KRW 1.7 trillion to KRW 1.3 trillion by agreeing that SK Specialty would handle its own legacy debt internally, including through new bond issues. Deleveraging since closing has come from:

• lower capex, shown by PP&E falling KRW 34 bn in FY2025;

• disposal of land, which fell KRW 50 bn;

• the KRW 20 bn rights offering in May 2025;

• better cash generation.

Borrowings fell KRW 57 bn in FY2025.

Cash flow

Free cash flow as reported in the press from DART data. Operating cash flow, capex, dividends paid and buybacks are not publicly disclosed in summary form.

The December 2025 transfer of KRW 292.3 bn from capital reserve to retained earnings lifted retained earnings from KRW 17.6 bn at the end of Q3 2025 to KRW 356.9 bn at year-end. That creates room for dividends to the financial sponsor. No buybacks have been made, and none are expected under private ownership.

Ratios

ROIC, the current ratio and the cash conversion cycle are not publicly disclosed.

Inflections to watch. Three trends are moving in the company's favour:

• the 2026 WF6 price reset, with 70–90% contract increases notified and spot prices for 6N material more than doubling year on year;

• a stronger memory cycle driven by HBM and AI-server DRAM;

• the end of change-of-control one-offs.

Together these point to sharply higher FY2026 operating income. The offsets are tungsten and AHF input inflation and higher dividend leakage to the sponsor.

Management guidance and consensus

There is no public guidance or sell-side consensus because the company is unlisted. The figures that matter for the outlook are:

• Q4 2025 revenue up about 30% and operating income up about 73% year on year;

• 2026 WF6 contract increases of 70–90%;

• the permanent exit of about 25% of global WF6 capacity from July 2026;

• strong demand for AI memory.

Together these support a material earnings recovery in FY2026, offset partly by higher tungsten and AHF costs.

Bull case

1. WF6 becomes a seller's market. With Kanto Denka and Central Glass gone, SK Specialty's 2,000 t plant, located outside China, becomes strategic supply for Samsung, SK hynix and possibly TSMC. Contract prices have already reset 70–90% higher, and spot prices are about three times prior-year levels.

2. The AI memory super-cycle lifts volumes. HBM and high-layer 3D NAND increase NF3 cleaning cycles and WF6 fill per wafer. Domestic revenue grew 6.8% in FY2025, and the Q4 2025 run-rate shows operating leverage returning.

3. Margin recovery to historical norms. EBITDA margins of 30–38% in FY2022–FY2024 show what the asset base can earn. As one-off sale costs drop out (the KRW 40.2 bn Q1 2025 loss) and pricing resets, operating margins could move back toward 20% or more.

Bear case

1. Input-cost squeeze. Tungsten makes up more than 60% of WF6 production cost. If Chinese export licensing tightens further, SK Specialty may not be able to pass costs through fast enough, as the fall in operating income through FY2025 already suggests.

2. Leverage and sponsor priorities. Net debt/EBITDA was about 3x, the unsecured rating is now A, and KRW 292 bn of reserves has been made distributable. Cash may go to dividends rather than to deleveraging or R&D, which is only 0.75% of revenue.

3. Competitive erosion in NF3. Hyosung Neochem's 11,500 t platform and Chinese capacity growth threaten pricing in the largest product line. Export growth already slowed to 4.2% in FY2025.

Key catalysts and monitorables (next 12 months)

FY2026 full-year results (6th-period business report): Expected timing: March 2027; What to watch: Whether operating income recovers above KRW 150 bn

WF6 contract renewals for 2027: Expected timing: Q4 2026 – Q1 2027; What to watch: Price levels and multi-year volume commitments

Chinese tungsten export policy: Expected timing: Ongoing; What to watch: Licence volumes and APT/tungsten oxide prices

Scrubber service commercial launch: Expected timing: 2026–2027; What to watch: First customer contract and revenue

Sponsor dividend declarations: Expected timing: 2026–2027; What to watch: Size compared with free cash flow and debt reduction

Credit-rating reviews: Expected timing: Mid-2027; What to watch: Possible outlook change on deleveraging

Earn-out settlement with SK Inc: Expected timing: 2026; What to watch: FY2025-linked payment of up to about KRW 85 bn

Molybdenum precursor qualification: Expected timing: 2026–2028; What to watch: Customer adoption of MoO2Cl2

Analyst verdict

SK Specialty is a high-quality, narrow-moat industrial asset at a cyclical turning point. Its competitive position rests on scale: the world's largest NF3 plant and joint-largest WF6 capacity, more than two decades of qualification at Samsung, SK hynix and LG Display, and a location in Korea that has become more valuable as China weaponises tungsten and Japanese producers exit. These are hard advantages to replicate. A new fluorine-gas plant takes 18–24 months to build and longer to qualify.

The financial record since the 2021 spin-off is mixed. Revenue of KRW 749.4 bn in FY2025 remains 11% below the FY2022 peak, and operating income has fallen for three straight years, from KRW 228.2 bn to KRW 84.5 bn. Part of that decline is cyclical (FY2023) and part is one-off (change-of-control payments in FY2025). Part is structural: raw-material costs pass through imperfectly, export growth is slowing against Chinese competition, and Hyosung's NF3 consolidation is closing the gap. The KRW 1 trillion revenue goal for 2025 was missed by a wide margin.

The 2026 set-up is the most favourable in years. The 2026 WF6 reset (70–90% contract increases and the exit of about a quarter of global capacity), plus AI-driven memory demand, should produce a step-change in profit. The Q4 2025 operating-profit jump of about 73% is an early sign. The main risk is that higher input costs absorb much of the price gain.

Under Hahn & Co, governance and capital allocation will favour cash returns. The December 2025 reserve conversion signals dividends ahead, which constrains deleveraging from about 3x EBITDA and limits R&D. That matters because the next technology transition, from tungsten to molybdenum, will need investment. The company's MoO2Cl2 patents are a valuable option on that shift. It remains to be seen whether a sponsor seeking an exit within the fund's life will fund it fully.

Verdict: the business offers a strong cyclical upturn backed by a secure franchise, with leverage and sponsor priorities as the main constraints. The most likely path is a clear profit recovery in 2026–2027 that positions SK Specialty for a sponsor exit, either a trade sale or an IPO, at a valuation above the implied 2025 entry value of about KRW 3.1 trillion. The key condition is that tungsten supply and WF6 pricing hold.