[Click eStock] "SK Innovation, Strong Performance Expected in Second Half... Target Price Up"

Shinhan Investment Corp. raised the target price for SK Innovation from KRW 220,000 to KRW 240,000 on the 31st, anticipating solid performance in the second half of the year.

Jinmyung Lee, Senior Researcher at Shinhan Investment Corp., stated, "We raised the target price reflecting upward revisions in earnings estimates and multiple expansions among peer companies. Although the fundamentals have somewhat weakened due to high earnings volatility in the core business in the first half and limited profitability improvements in the battery business, the refining segment in the second half is expected to deliver solid results driven by an increase in refining margins due to a favorable supply-demand balance." He added, "Battery profitability is expected to improve by 9.3 percentage points compared to the first half, supported by increased shipments from productivity improvements at the U.S. plant and the expansion of the Advanced Manufacturing Production Credit (AMPC) in the U.S., thereby strengthening the fundamentals of both the core and growth businesses."

SK Innovation’s Q2 earnings this year fell short of consensus, recording an operating loss of KRW 106.8 billion, marking a return to the red. Lee explained, "The refining segment turned to a loss due to inventory valuation losses from falling oil prices and a sharp drop in refining margins. The battery segment recorded an operating loss of KRW 131.5 billion, with the deficit narrowing thanks to continued yield improvements at the U.S. plant and cumulative reflection of AMPC."

A return to profitability is expected in Q3. Lee said, "Operating profit in Q3 is expected to reach KRW 702.4 billion, turning positive. The refining segment is anticipated to return to profit due to rising oil prices and refining margins, with a tight supply continuing amid the driving season and increased demand from China, sustaining an upward trend in refining margins." Battery operating profit is also expected to turn positive due to productivity improvements at the U.S. plant and AMPC reflection. Lee added, "With increased shipments from the Georgia plant expanding the AMPC effect, operating profit of KRW 182.2 billion is expected in the second half."

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