[Click eStock] "SK Innovation, Positive Outlook for Refining Division, Battery Segment Continues Deficit"

by Kwon Jaehee

Published 12 Apr.2022 07:47(KST)

[Click eStock] "SK Innovation, Positive Outlook for Refining Division, Battery Segment Continues Deficit"

[Asia Economy Reporter Kwon Jae-hee] Eugene Investment & Securities maintained its 'Buy' rating and a target price of 300,000 KRW for SK Innovation on the 12th.

SK Innovation's performance for the first quarter of this year is expected to show sales of 16 trillion KRW and an operating profit of 1.1 trillion KRW.

By business segment, the refining division is expected to record an operating profit of 781.8 billion KRW. The core business strength continues due to the rise in international oil prices and refining margins, and a significant improvement in performance is anticipated due to the base effect of one-time expenses such as bonuses reflected at the end of last year. The operating rate of the crude distillation unit (CDU) has also started to rebound, indicating positive performance.

The chemical division is expected to record an operating profit of 89 billion KRW, as trading of polypropylene (PP), polyethylene (PE), and benzene, toluene, mixed xylene (BTX) in the first half of the year has been sluggish, leading to a 16% decline in chemical business spreads. Researcher Hwang Seong-hyun of Eugene Investment & Securities analyzed, "A performance rebound is expected due to the base effect of one-time costs, but a contraction is forecasted again in the second quarter."

The battery division continues to post an operating loss of 170.7 billion KRW. The deficit persists due to vehicle semiconductor supply issues, initial factory operation costs, and the separator material plant in Europe operating at only 50% capacity, resulting in only a slight reduction in losses.

Researcher Hwang stated, "Compared to competitors, the lower CDU operating rate means less leverage from the refining super-boom market, but the operating rate is increasing, and margins are improving mainly in kerosene and diesel," adding, "Furthermore, the listing of SK On is expected after 2025, which could lead to a mid- to long-term revaluation of its value."