[Click eStock] 'Split' SK Innovation, What Is the Future Stock Price?

"Short-term Slump, Long-term Optimism"

[Asia Economy Reporter Ji Yeon-jin] Regarding SK Innovation's decision to split its battery business, the financial investment industry expects short-term stock prices to be sluggish but views it as a long-term revaluation opportunity, maintaining a buy investment opinion and target price.

Han Sang-won, a researcher at Daishin Securities, said on the 2nd, "The split presents conflicting effects, including the opportunity for value revaluation due to the independence of the battery business and the possibility of share dilution and holding company discount upon the listing of the battery spin-off company," but added, "the value of the battery business currently reflected in the stock price is estimated to be only 5 trillion KRW, whereas considering the market capitalizations of competitors such as CATL (218 trillion KRW), LG Chem (60 trillion KRW), and Samsung SDI (50 trillion KRW), the positive effect is judged to be greater."

The previous day, SK Innovation announced through Story Day that it plans to spin off the battery business and expand the proportion of green assets from 30% in 2020 to 70% in 2025 through an investment of 30 trillion KRW over the next five years. The investment amounts by sector are 18 trillion KRW for batteries, 5 trillion KRW for separators, and 7 trillion KRW for green transformation (existing business).

The battery sector is expected to expand production capacity from 40 GWh this year to 200 GWh in 2025 and 500 GWh in 2030. The order backlog as of the first quarter of this year is 600 GWh (approximately 80 trillion KRW), and including Ford's volume, it is estimated to have increased to 1000 GWh (approximately 130 trillion KRW). The separator sector also plans to expand production capacity aggressively to 4 billion m2 in 2025 (1.4 billion m2 in 2021). The chemical sector is expected to secure a recycling production capacity of 900,000 tons by 2025 and expand the proportion of eco-friendly product production to 80% (50% in 2023).

Shinhan Investment Corp. expects SK Innovation's operating profit this year to exceed forecasts at 415.8 billion KRW, down 17% from the previous quarter. Refining operating profit is expected to decline due to reduced inventory gains despite a slight improvement in refining margins, while chemicals and lubricants are expected to continue strong performance due to improved product spreads. For batteries, increased shipments for E-GMP and higher operating rates are expected to increase sales and reduce losses.

Lee Jin-myung, a researcher at Shinhan Investment Corp., said, "The split of a high-growth business division is a discount factor, and short-term sentiment deterioration is inevitable," but added, "However, considering that the battery value was previously undervalued compared to competitors and that future performance (refining and battery improvements) and growth (aggressive capacity expansion) momentum will be highlighted, concerns are expected to gradually ease."

Anna Lee, a researcher at Ebest Investment & Securities, also said, "Although the method of SK Innovation's split or listing has not yet been decided, short-term stock prices are expected to be sluggish due to the possibility of a physical split and the LG Energy Solution IPO," adding, "In the long term, since the company's current order backlog has increased to a level similar to those of CATL and LG Chem, the increase in battery value and the long-term direction from materials such as LiBS and battery recycling to green ecosystem construction are positive."

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