[Click eStock] "SK Gas Posts Unexpectedly Strong Earnings... Target Price Raised"

On November 4, Hana Securities raised its target price for SK Gas by 10% to 3.3 million won, while maintaining its buy recommendation.

In the third quarter, SK Gas recorded sales of 2 trillion won, up 12.5% year-on-year. Operating profit reached 173.5 billion won, a 303.3% increase over the same period last year. The company's growth was driven by a weaker won against the dollar, increased LPG sales volume, and the consolidation of the power generation segment.

Yoo Jaeseon, a researcher at Hana Securities, stated, "In the previous quarter, unresolved optionality amounts were recognized as profit in this quarter, and the profit margin, considering this effect, is estimated to be around 30%. The cost settlement related to the delay in the normalization of commercial operations is expected to be reflected in the fourth quarter."

Yoo added, "Third-quarter operating profit exceeded market consensus, and excluding certain one-off factors, the results were generally in line with market expectations. The performance of the power generation segment has normalized, and in the case of LPG, increased external uncertainties actually led to improved profitability. Although SMP is showing a further decline in the fourth quarter, the year-on-year profit growth trend is expected to continue, considering anticipated one-off gains in the fourth quarter."

Yoo also noted that, in addition to the company's fundamental earnings strength, there is always the potential for unexpectedly strong results from trading activities. He explained, "Unlike the previous quarter, there were not many opportunities to generate trading profits from rising LPG prices, as the volatility of the relative price of propane versus crude oil was limited."

He continued, "Due to the characteristics of the power generation segment, performance tends to be heavily influenced by changes in external variables, but considering future increases in electricity demand, there remains room for further improvement in utilization rates. As for the new LNG bunkering business currently being promoted, LNG bunkering vessels are under construction domestically and are scheduled for delivery in the second half of 2027. Stable profit generation is expected by linking these assets with terminal facilities."

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