[Click eStock] "SK Inno, Expected to Return to Profit in 2023... Target Price ↓"

[Asia Economy Reporter Hwang Yoon-joo] Yuanta Securities analyzed on the 1st that SK Innovation is highly likely to return to profitability in 2023. However, they maintained the investment opinion as 'Buy' and lowered the target price from 410,000 KRW to 370,000 KRW.

Researcher Hwang Kyu-won of Yuanta Securities stated, "We can expect operating profit to turn positive from a 609.9 billion KRW loss in 2022 to a 75 billion KRW profit in 2023."

This is thanks to three simultaneous positive factors: an increase in order backlog, diversification of clients, and a return to profitability. Researcher Hwang analyzed, "SK On Co., Ltd.'s order volume of 1,048 GWh ranks third globally," adding, "An additional 1,300 GWh is underway, so the secured volume will increase further by 2030."

Regarding client diversification, he explained, "The expected battery sales revenue of 7.6 trillion KRW in 2022 is concentrated 70-80% on Hyundai/Kia Motors," and added, "With mass production at the Georgia plant in the U.S. in the second half of 2022, the shares of Ford Co., Ltd. and Volkswagen Co., Ltd. will increase."

[Image source=Yonhap News]

He also diagnosed, "Expansion of metal-linked battery transaction prices, resolution of defective product issues at the new module plant in Hungary, and expansion of high-margin U.S. battery sales are taking place," concluding, "The possibility of turning to profitability has increased."

Researcher Hwang explained, "We have raised the value of SK On Co., Ltd., 100% owned, from 18 trillion KRW to 20 trillion KRW," adding, "This reflects both the return to profitability in 2023 and the reduction of financial burden through funds of 2 to 4 trillion KRW."

However, the equity value of SK Innovation Co., Ltd. was slightly lowered to 11 trillion KRW (= SK On Co., Ltd. business value x equity ratio x holding company discount rate of 50%).

Researcher Hwang explained, "This is because SK On Co., Ltd.'s equity ratio may decrease to around 85-92% due to the issuance of convertible preferred shares."

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