[Click eStock] "SK Inno, Next Year's Operating Profit Forecast Downgraded... Target Price Down"

NH Investment & Securities on the 19th downgraded the target price of SK Innovation to 210,000 KRW, anticipating that next year's operating profit forecast will be lower than previously expected. The investment rating was maintained as Buy.

On the same day, Youngkwang Choi, a researcher at NH Investment & Securities, stated, "We are lowering SK Innovation's operating profit forecast for next year by 13% compared to the previous estimate." The valuation timing was changed to 2025 for the battery segment and to next year for other business segments.

Third-quarter sales are expected to increase by 7.6% quarter-on-quarter to 20.1 trillion KRW, with operating profit turning positive to record 1.1 trillion KRW. In particular, the petroleum segment is expected to return to profitability with an operating profit of 817.8 billion KRW, influenced by rising refining margins and oil prices. The chemical segment is expected to see a 12.9% increase quarter-on-quarter to 192.2 billion KRW in operating profit as the inventory valuation loss from the previous quarter disappears.

However, during the same period, the battery segment is expected to continue its operating loss of 121.3 billion KRW, following the previous quarter's deficit. Researcher Choi said, "Due to weakening upstream demand, sales volume improvement will be minimal," adding, "Excluding the U.S. Advanced Manufacturing Production Credit (APMC) of 174.4 billion KRW, the operating loss will be 295.7 billion KRW, similar to the previous quarter." The lubricants segment is expected to see a 21% decrease quarter-on-quarter in operating profit to 205.3 billion KRW due to the off-season effect.

Researcher Choi commented, "While price declines are occurring across the secondary battery industry, SK On's utilization rate increase is slow due to weakening upstream EV demand and customer ramp-up delays," adding, "Entering the gasoline off-season, the petroleum segment's performance is also expected to decline in the fourth quarter."

Nevertheless, he said, "Although the pace of performance improvement will slow in the short term, SK On's equipment yield continues to improve," and added, "Once the price floor is confirmed and upstream demand improves, the operating environment will improve, leading to a sharp profitability improvement along with increased utilization rates."

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