SK Holdings Co., a merged entity of SK Group’s holding company SK Holdings and IT service unit SK C&C, is expected to start making money from artificial intelligence (AI) business starting next year, an upside to its stock prospects, market observers say.

The stock price of SK Holdings largely hinged on the performance of its subsidiaries. SK Group’s energy unit SK E&S Co. and SK Biopharmaceutical Co., in which the holding company holds a 100 percent stake, make up the bulk of its earnings. SK Telecom Co. and SK Innovation Co. in which it owns a 25.2 percent stake and 33.4 percent stake respectively, also influence its balance sheet.

According to sources from SK Group and the security industry on Wednesday, SK Holdings C&C’s IMB Watson-based AI service named Aibiril would become complete and ready for commercial run next year. The company has already finished text-based AI system development and aims to complete development of voice-activated system by early next year.

IBM Watson is a cognitive computing system that can answer questions posed in natural language. It became popular when it had won the quiz show Jeopardy! versus human contenders. Aibiril is a Korean version of Watson developed by incorporating Watson’s natural language processing technology.

SK is pinning high hopes on Aibril. It expects its AI-cloud business would generate sales of 300 billion won ($253 million) in 2018 and 600 billion won in 2020. It aims to achieve 400 billion won in revenue from its AI and cognitive robot convergence business. The smart factory business, designed to maximize efficiency of factory manufacturing by incorporating AI, is expected to create 300 billion won sales in 2018 and 500 billion won in 2020. AI-based logistics business is also aimed at producing 600 billion won in sales by 2018.

The company has an ambitious plan to achieve 63 billion won in operating profit in 2018 and 250 billion won in 2020 entirely from AI-related businesses. Market analysts expect SK Holdings to raise net income of 1.5 trillion won on a consolidated basis in 2020. If things go as planned, its AI-related business would account for 15 percent of its total profits.

SK Group is working hard to nurture AI as its next growth engine. SK Telecom’s AI robot NUGU has already exceeded sales of 15,000 units in just two months since its launch in late September.

Hana Financial Investment Co. estimated SK Holdings’ price to earnings ratio (PER) to be 12, relatively cheap for an IT stock.

As of 14:28 on Thursday, SK Holdings shares fell 1.22 percent to 242,000 won in Seoul trading.

By Hong Jang-won

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