[Click eStock] SK Chemicals, Earnings Growth and COVID-19 Vaccine Momentum Combined

Minimal Negative Impact from COVID-19... Profit Growth Possible This Year Ahead of Vaccine Development

[Asia Economy Reporter Minwoo Lee] SK Chemicals, whose operating profit increased by about 120% year-on-year in the first quarter of this year due to exchange rate effects, falling oil prices, and reduced marketing expenses, is expected to continue its profit growth going forward. It is analyzed that the negative impact of the novel coronavirus disease (COVID-19) is minimal, and the development of related vaccines will act as a positive factor.

According to Samsung Securities on the 11th, SK Chemicals recorded sales of 252.5 billion KRW and an operating profit of 8 billion KRW in the first quarter of this year. Sales decreased by 20.9% compared to the same period last year, but operating profit increased by 119.2%. Since the profit and loss of the bioenergy division, decided to be excluded in February, was excluded immediately from the first quarter results instead of the previously expected June, sales decreased compared to the first quarter of last year, but operating profit significantly increased. Based on the bioenergy business before its sale, both sales and operating profit grew by 4.6% and 368%, respectively, compared to the same period last year.

The background of this growth is largely attributed to cost reductions in the Green Chemical (GC) division due to exchange rate effects and falling oil prices. The expansion of remote work due to COVID-19 also contributed to reduced marketing expenses. Despite a decrease in demand due to COVID-19, the Co-poly division saw only a 2.8% decrease in sales year-on-year due to increased new demand related to quarantine. SK Bioscience reduced its deficit through cost-cutting despite the absence of technology licensing fees.

Samsung Securities expects SK Chemicals to steadily increase profits this year due to a decline in cost ratio despite the absence of bio sales in the GC division. Junyoung Jung, a researcher at Samsung Securities, explained, "The LS division is minimally affected by COVID-19, and SK Bioscience has momentum due to the planned start of Phase 1 clinical trials for the COVID-19 vaccine within the third quarter." He added, "This vaccine is a subunit vaccine, and rapid clinical trial initiation is expected by leveraging experience in developing a cervical cancer vaccine of the same type."

Against this backdrop, Samsung Securities maintained a 'Buy' investment opinion on SK Chemicals and raised the target stock price by 22% to 100,000 KRW. The closing price on the previous trading day was 79,500 KRW.

This content was produced with the assistance of AI translation services.