[Click eStock] "SK Innovation, 4Q Earnings Slump... Target Price Down"

Shinhan Investment Corp. lowered the target price for SK Innovation to 180,000 won on the 19th, citing weak fourth-quarter earnings and a deterioration in battery fundamentals. The investment rating was maintained at 'Buy.'

Senior Researcher Jinmyung Lee stated, "The fourth-quarter operating profit is expected to be 117 billion won, down 93% from the previous quarter, falling short of the consensus of 442.9 billion won," adding, "Refining operating profit is expected to turn to a loss (-257.2 billion won) due to the impact of refining margins and a sharp drop in oil prices."

He noted, "International oil prices declined amid doubts about the effectiveness of voluntary production cuts by the Organization of the Petroleum Exporting Countries (OPEC)+ and concerns over demand due to an economic recession, resulting in inventory valuation losses," and added, "Refining margins are expected to fall sharply by $8.6 per barrel quarter-on-quarter due to weakness mainly in transportation products, making a significant profit decline inevitable."

Chemicals and lubricants are expected to see profit declines due to the disappearance of inventory valuation gains from the previous quarter and a drop in spreads. Chemical operating profit is forecasted to decrease by 50% quarter-on-quarter to 118.6 billion won. PX spreads are also estimated to fall by 18% compared to the previous quarter.

Due to the sluggish market conditions, the timing of the battery segment turning profitable is also expected to be delayed. Senior Researcher Lee diagnosed, "Battery sales will decline by 4% quarter-on-quarter due to adjustments in existing plant utilization rates, despite a recovery in shipments centered in the U.S., with the average selling price (ASP) falling by 10%."

He added, "The Advanced Manufacturing Production Tax Credit (AMPC) is expected to increase to 222.9 billion won compared to the previous quarter, but operating profit will be -31.1 billion won, indicating limited profitability improvement," and further explained, "Despite the expansion of AMPC due to productivity improvements at the U.S. Georgia plant, performance is expected to remain weak due to adjustments in some customer volumes caused by a slowdown in upstream electric vehicle (EV) demand."

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