[Click eStock] "SL Faces Accounting Issue at India Subsidiary... Target Price Down 35%"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a neutral investment opinion on SL on the 22nd and set a target price of 13,000 KRW, 35% lower than the previous target. This decision was based on the judgment that the stock price could be affected due to accounting issues arising in the Indian subsidiary.

SL disclosed on the 20th, after market close, that the prosecution had notified them of violations of accounting standards by the Indian subsidiary. The main violations included the understatement and overstatement of operating profit of the subsidiary and the overstatement of deferred corporate tax liabilities.

The Securities and Futures Commission stated that SL’s Indian subsidiary understated operating profits for 2016 and 2017 by 12.98 billion KRW and 11.92 billion KRW respectively, due to concerns over pressure to lower unit prices from customers. In 2018, when operating profit decreased due to rising material costs, it was overstated by 11.17 billion KRW.

Regarding the overstatement of deferred corporate tax liabilities, it was pointed out that the effect of foreign tax credit was not reflected, leading to overstatements from 2013 to 2017. Accordingly, the Securities and Futures Commission imposed sanctions including fines, designation of auditors for three years, recommendation for dismissal of responsible executives and six months of suspension, prosecution notification, and corrective demands.

In response, the Korea Exchange plans to decide by the 10th of next month whether SL will be subject to a substantive review of listing eligibility, and trading of SL shares will be suspended until then. If subject to review, SL will undergo an additional substantive review of listing eligibility, which will determine whether the listing is maintained or delisted.

According to the 2018 business report, SL’s consolidated operating profit was 54.8 billion KRW in 2017 and 16.7 billion KRW in 2018, but after the corrected disclosure, these figures increased by 8.6 billion KRW and decreased by 12.1 billion KRW respectively. Researcher Song Seonjae of Hana Financial Investment said, “The target price is valid until the 10th of next month, when it will be determined whether SL is subject to the substantive review of listing eligibility due to accounting standard violations,” adding, “If there are changes in performance after the issue becomes clear, we will present a new target price.”

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