[Click eStock] SKC Continues 1Q Losses... Profit Expected from 2Q

DB Financial Investment forecasted that SKC's first-quarter earnings would fall short of consensus and continue to incur losses, but it is expected to turn profitable from the second quarter onward. The investment opinion 'Buy' and the target price of 140,000 KRW were maintained.

Jung Jaeheon of DB Financial Investment stated, "The first quarter is expected to continue posting an operating loss of 2.1 billion KRW due to weakness in the chemical sector and declining profitability in the secondary battery materials segment."

Researcher Jung predicted, "The secondary battery materials segment is expected to see a decrease in shipments due to inventory adjustments continuing until early in the year and weak demand, with profitability further deteriorated by rising copper prices and electricity costs." He projected sales in the secondary battery materials segment to decline by 4.0% quarter-on-quarter to 175.7 billion KRW, and operating profit to decrease by 11.8% to 10.7 billion KRW.

However, he expected the deficit to narrow compared to the previous quarter due to improved profitability from an increase in ASP (average selling price) in the semiconductor materials segment and a rise in PO spread in the chemical segment.

Researcher Jung anticipated a successful turnaround to profitability in the second quarter. He said, "Profitability, which slowed due to weakness in the chemical and secondary battery materials businesses, will gradually improve starting from the first quarter. SKC's second-quarter sales are expected to reach 801.6 billion KRW, with operating profit of 29.0 billion KRW, driven by growth in secondary battery materials shipments and improved chemical profitability, leading to a return to profit."

He evaluated, "In the secondary battery materials segment, cost burdens from increased electricity costs and rising copper prices are expected to persist into the second quarter, but profitability will improve quarter-on-quarter due to recovery in copper foil demand and increased shipments to captive customers." The chemical segment is expected to see slight improvements in PO and PG spreads. However, profitability is assessed to improve only marginally due to continued sluggishness in the SM market.

He added, "The large-scale domestic and overseas investments in copper foil facilities and the commercial operation of growth businesses such as silicon anode materials and glass substrates starting in 2024 and 2025 remain attractive."

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