[Click eStock] "SK Gas Gradually Moving Away from LPG"

Shift from LPG-Focused Business Structure to LNG and Hydrogen Sectors
SK Securities "SK Gas Target Price Newly Set at 150,000 KRW"

[Asia Economy Reporter Gong Byung-sun] SK Gas is expanding its business from a structure focused on liquefied petroleum gas (LPG) to include liquefied natural gas (LNG), hydrogen, and other areas.

On the 24th, SK Securities newly issued a 'Buy' investment opinion on SK Gas with a target price of 150,000 KRW. The previous day's closing price was 120,500 KRW.

Short-term profitability pressure is occurring. This is because the price of commercial paper (CP) has sharply increased as the recent rise in oil prices has stalled. LPG CP prices have risen for three consecutive months in September, October, and November.

However, LPG demand appears to offset concerns about a slowdown in vehicle demand due to increased chemical demand. Since LPG usage was mainly concentrated in transportation, there were concerns about a decline in LPG vehicle demand. But chemical product demand increased nearly threefold from 22 million barrels in 2015 to 61 million barrels last year. Additionally, with the rise in LPG prices, growth in terms of scale has also become possible.

SK Gas is entering LNG, hydrogen, and other businesses to move away from its LPG-centered business structure. Currently, through equity investments with Korea National Oil Corporation and MOCLT, it is preparing an LNG combined terminal scheduled for completion in June 2024. Han-saem Park, a researcher at SK Securities, said, “The role of LNG is an intermediate stage transitioning the energy industry toward eco-friendliness,” adding, “Demand and cargo volume will inevitably increase, and LNG will generate profits comparable to LPG by 2025.”

The linkage of by-product hydrogen and extracted hydrogen businesses is expected to serve as a foothold for entering the hydrogen ecosystem. This is likely to provide SK Gas with long-term growth momentum. Researcher Park explained, “SK Gas plans to expand hydrogen charging stations based on its existing LPG charging stations,” and “Proactive infrastructure expansion will positively impact entry into the hydrogen ecosystem.”