[Click eStock] "SK Innovation, Vaccine Development and Battery Expectations Rise... A Time to Pay Attention"

Shinhan Financial Investment Issues 'Buy' Rating and 200,000 KRW Target Price... Closing Price on 18th at 156,500 KRW

[Asia Economy Reporter Kum Bo-ryeong] An analysis has emerged suggesting that it is time to pay attention to SK Innovation due to expectations surrounding vaccine development and batteries.

According to Shinhan Financial Investment on the 19th, SK Innovation's fourth-quarter performance is expected to show an operating loss of 207.2 billion KRW, with the deficit widening compared to the previous quarter. The refining sector is anticipated to turn to a loss due to weak refining margins and the disappearance of inventory valuation gains from the previous quarter.

However, there is an analysis that the possibility of core business recovery has increased due to the development of a novel coronavirus (COVID-19) vaccine. Shinhan Financial Investment estimated SK Innovation's operating profit for next year at 749.3 billion KRW, driven by a recovery in the refining industry following the vaccine launch.

Researcher Lee Jin-myung of Shinhan Financial Investment explained, "Recently, lockdown measures have resumed in some countries due to the resurgence of COVID-19. The decline in oil demand caused by COVID-19 acts as a major obstacle to the recovery of the refining industry. However, expectations for Pfizer and Moderna vaccine development have increased the possibility of demand recovery. The normalization of economic activities following the vaccine launch leads to a recovery in transportation fuel demand (gasoline, jet fuel, diesel). The possibility of a rebound in refining margins due to the improvement in the refining industry next year remains valid."

Battery expectations also remain. Next year's battery production capacity is expected to reach 41 GWh with the operation of the China Yancheng plant (9.5 GWh). The researcher said, "Considering the expansion of order backlogs, aggressive capacity expansion is expected to continue. With sales and profit growth from increased production capacity, achieving the break-even point (BEP) in 2022 is also anticipated."

Shinhan Financial Investment gave SK Innovation a 'Buy' investment rating and set a target price of 200,000 KRW. The target price was revised upward from the previous 160,000 KRW. The closing price on the 18th was 156,500 KRW.