[Click eStock] 'Earnings Shock' SK Innovation, Target Price Downgraded

[Asia Economy Reporter Junho Hwang] Shin Young Securities downgraded the target price of SK Innovation, which recorded an earnings shock in the fourth quarter of last year, on the 3rd.

In the fourth quarter of last year, SK Innovation recorded an operating loss of 47.3 billion KRW, significantly missing the market expectation of an operating profit of 556 billion KRW.

The chemical and battery businesses performed poorly, and there were large one-time expenses. The one-time expenses included a 60 billion KRW increase in costs due to the expansion of the battery/materials business, 80 billion KRW in costs due to fuel tax reductions, and 170 billion KRW in stock bonuses to employees.

The company's total other expenses amounted to 598 billion KRW (refining 283 billion KRW, chemicals 100 billion KRW, lubricants 38 billion KRW, battery 104 billion KRW, materials 73 billion KRW). Excluding the aforementioned costs, about 300 billion KRW in additional expenses occurred, mostly influenced by performance bonuses.

SK Innovation also lowered its targets for next year. The sales target for this year remains in the mid-60 trillion KRW range, but the operating profit target is set to break even in the fourth quarter. Shin Young Securities analyzed that the order backlog significantly increased from 600 GWh in the first quarter of last year to 1600 GWh in the third quarter of the same year, which is an inevitable growing pain due to the initial fixed cost increase.

Researcher Ji-yeon Lee of Shin Young Securities stated, "The target price is lowered from 350,000 KRW to 330,000 KRW due to the downward revision of this year's estimates, but the battery business value growth could lead to a 39% increase in operating profit compared to the previous year."

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