[Click eStock] "SK IE Technology, Short-term Earnings Slowdown Due to Weakness in China IT... Target Price Down"

[Asia Economy Reporter Song Hwajeong] KB Securities on the 2nd downgraded the target price of SK IE Technology from 280,000 KRW to 240,000 KRW, citing a short-term performance slowdown due to sluggishness in the Chinese IT sector. The investment rating was maintained at 'Buy.'

Lee Changmin, a researcher at KB Securities, explained the reason for the target price downgrade: "We lowered the operating profit estimates for 2021 and 2022 by 19% and 18%, respectively, reflecting the decreased demand for separators caused by reduced Chinese smartphone production due to chipset supply issues." He added, "As the 3-month average yield of the 1-year Treasury bond rose from 0.66% to 1.08%, the Cost of Equity (COE) increased from 8.02% to 8.45%, and the Weighted Average Cost of Capital (WACC) rose from 6.69% to 6.98%."

SK IE Technology's third-quarter results fell short of market expectations (consensus). Third-quarter sales increased by 29% year-on-year to 152.1 billion KRW, and operating profit rose by 41% to 41.7 billion KRW. The researcher analyzed, "The semiconductor supply shortage led to a decline in Chinese smartphone production, resulting in poor performance in IT separator sales." He also noted, "The new business segment experienced continued sales gaps and losses due to delayed market development of the Flexible Cover Window (FCW)." He added, "A similar operating environment is expected to persist in the fourth quarter, so performance is anticipated to be at a level comparable to the third quarter."

KB Securities estimated SK IE Technology's performance for next year with sales increasing by 51% to 913.9 billion KRW and operating profit rising by 72% to 278.1 billion KRW. The researcher stated, "Although the sluggish demand in the Chinese IT sector is expected to continue until the first half of next year, the full-scale operation of Phase 3 at the Chinese plant and Phase 1 at the Polish plant will expand separator sales for electric vehicles (EV), leading to significant sales growth compared to the previous year."

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