SK Inno, Battery Sales to Reach '6 Trillion Won Annually'... "Operating Profit Turnaround Difficult This Year"

"SK On Does Not Consider IPO" Despite Caution, Securities Firms Show Interest
"Minimum Corporate Value 20 to 30 Trillion Won if Listed"

[Asia Economy Reporter Moon Chaeseok] SK Innovation surpassed 3 trillion KRW in annual sales in its battery division for the first time last year, but detailed forecasts are mixed. While many expect improved performance in the long term due to expanded production capacity, analyses suggest that turning a profit in operating income within this year will not be easy.

According to the financial investment industry on the 3rd, SK Innovation's battery division (SK On) recorded annual sales of 3.0398 trillion KRW last year, an increase of about 90% compared to 2020, but operating losses amounted to 683.1 billion KRW. The 309.8 billion KRW loss in the fourth quarter was significantly impacted by investment costs in overseas factories. According to SK Innovation, commercial operations began in the Yancheng and Huizhou factories in China from the first half of last year, and from the first quarter, the US Plant 1 and Hungary Plant 2 have been operated in earnest.

Looking at securities reports published around the company's earnings announcement on the 28th of last month, investment opinions and target stock prices showed mixed views. DB Financial Investment and Hana Financial Investment raised their investment opinions from 'hold' to 'buy,' but Samsung Securities and Shin Young Securities lowered their target prices from 390,000 KRW to 330,000 KRW and from 360,000 KRW to 330,000 KRW, respectively. The closing price on the previous trading day was 216,000 KRW.

Even Samsung Securities and Shin Young Securities, which lowered their target prices, did not disagree with the view that performance will improve with long-term production increases. However, they presented somewhat conservative analyses regarding the adjustment of the operating profit turnaround forecast to the fourth quarter.

Hyunryul Cho, a researcher at Samsung Securities, explained, "Although the company raised production capacity from the existing 60 GWh to 77 GWh after completing the battery factory by the end of the year, the timing of quarterly operating profit turning positive has been delayed to the fourth quarter due to initial operating costs, so it is judged that turning an annual operating profit positive this year will be difficult." Ji-yeon Lee, a researcher at Shin Young Securities, said, "The order backlog increased significantly from 600 GWh in the first quarter of last year to 1,600 GWh in the third quarter, rapidly expanding the scale, and the initial fixed costs increased, which is considered an inevitable growing pain."

Although the company stated during the fourth-quarter conference call that "an initial public offering (IPO) is not currently being considered at all," interest from the securities industry was high. According to the financial investment industry, SK On is proceeding with the preliminary bidding document submission process for a pre-IPO (fundraising before listing) worth 3 to 4 trillion KRW in the second week of this month. Some institutions have presented specific corporate value forecasts based on SK On's IPO. Hyuntae Kim, a researcher at BNK Investment & Securities, said, "With LG Energy Solution listed at a market capitalization of over 100 trillion KRW, SK On's value is expected to be re-evaluated," adding, "Considering that SK On's battery order backlog is similar to LGES's and that its production capacity is expected to be about 60% of LGES's by 2025, SK On's value is estimated to be at least 20 to 30 trillion KRW."

SK Innovation emphasized that annual sales are on the rise. It surpassed 3 trillion KRW last year and is expected to increase to the 6 trillion KRW range this year. SK Innovation stated, "With the US Plant 1 and Hungary Plant 2 starting operations from the first quarter, sales volumes from customers such as Ford and Volkswagen are expected to increase significantly," adding, "We will achieve annual battery sales in the 6 trillion KRW range this year."

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