[Click eStock] "SK Inno, 1Q Earnings Disappoint... Target Price Down"

Yuanta Securities lowered the target price for SK Innovation from 310,000 KRW to 250,000 KRW on the 21st. This reflects the expected poor performance this year and the increased burden of borrowings.

Yuanta Securities forecasted that SK Innovation's sales for the first quarter of this year will be around 17.2 trillion KRW, with an operating profit of approximately 151.6 billion KRW. Although the company is expected to return to profitability after recording an operating loss of 688.4 billion KRW in the fourth quarter of last year, it falls far short of market expectations (629.8 billion KRW). The estimated operating profits by segment are ▲ Refining 105.2 billion KRW ▲ Battery 267.7 billion KRW loss ▲ Petrochemicals, lubricants, and resource development 355.2 billion KRW.

In particular, the battery segment is expected to see sales grow by 82% compared to last year, reaching 13.8 trillion KRW, but operating losses of 260 billion KRW are anticipated. However, from the second quarter, due to the effect of the U.S. Inflation Reduction Act (IRA), a subsidy of 45 USD/kWh will be received for battery modules sold at U.S. factories, which can be deducted from the cost of sales. Nevertheless, since this is tied to price reductions for battery deliveries to automakers, the actual effect is expected to be halved.

Annual sales for this year are expected to be 65.9 trillion KRW, with an operating profit of 1 trillion KRW. By segment, the figures are ▲ Refining 359.5 billion KRW ▲ Battery 353.1 billion KRW loss ▲ Petrochemicals, lubricants, and resource development 1.2 trillion KRW.

Hwang Gyu-won, a researcher at Yuanta Securities, explained the reason for lowering the target price, saying, "The scale of the operating profit estimate has been lowered by 41% compared to the beginning of the year (1.7 trillion KRW)," and "the borrowing burden this year is also expected to increase by 6.1 trillion KRW in one year."