[Click eStock] "SK Innovation Target Price Lowered to 240,000 Won"

Yuanta Securities on the 12th downgraded the target price of SK Innovation to 240,000 KRW, stating that "SK Innovation's stake in SK On could decrease from the existing 90% to 80%."

Researchers Hwang Kyuwon and Park Hyunju of Yuanta Securities released a report on SK Innovation on the same day, analyzing that the company must endure a weak battery market in the first half of 2024.

They forecast the 2024 performance to be sales of 68.9 trillion KRW, operating profit of 1.8 trillion KRW (operating margin 2.5%), and net income attributable to controlling shareholders of 1.2 trillion KRW. Operating profit is expected to decrease by about 8% compared to last year's 1.9 trillion KRW. Although the refining, petrochemical, and lubricant sectors are expected to continue their boom, a weakness in the battery sector appears inevitable. In particular, production facility adjustments are anticipated due to battery client changes and inventory adjustments by major automakers in the first half, along with increased fixed cost burdens from new expansions. Expected profit and loss by segment are refining 866.3 billion KRW, battery 645.9 billion KRW, and petrochemical, lubricant, and resource development 1.9 trillion KRW.

Battery operating profit in the first half of 2024 is expected to temporarily retreat to 702.3 billion KRW. The global battery market demand in 2024 is projected to increase by 20% year-on-year to 1.2 TW. However, SK On's sales volume is expected to stagnate, with a particular concern of a 30% decrease in the first half. Some of the supply volume to major U.S. client Ford is being shifted to Hyundai Kia Motors, causing production halts due to facility changes. First-half sales volume could decrease by 30% compared to the second half of the previous year. Battery production capacity will expand by 71% from 89 GW to 152 GW (30 GW in Hungary in Q1, 33 GW in China in Q2), but initial depreciation costs will increase. The ramp-up of yield and facility utilization due to large-scale equipment operation may proceed slowly.

As of February 2024, the PBR stands at 0.5 times, at the bottom of the historical band of 0.5 to 1.4 times. Despite the boom in refining, petrochemical, and lubricant sectors, this is due to the financial burden of the growth business battery subsidiary. SK On's capital expenditure in 2024 is 7.5 trillion KRW, but with cash holdings of 3.6 trillion KRW, 4 trillion KRW of external funding is required. Researchers Hwang Kyuwon and Park Hyunju stated, "If a pre-IPO is utilized, SK Innovation's stake in SK On could decrease from the existing 90% to 80%," adding, "Reflecting this, we lower the target price to 240,000 KRW."

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