[Click eStock] "SK Ocean Plant Q3 Earnings Disappoint... Target Price Down"

Kiwoom Securities lowered the target price of SK Ocean Plant to 25,000 KRW on the 16th, stating that "the operating profit in the third quarter of this year fell short of market expectations." The investment rating was maintained as a buy.

On the same day, researchers Jonghyung Lee and Sojung Kim of Kiwoom Securities said, "SK Ocean Plant's operating profit in the third quarter was 16.4 billion KRW, down 46% compared to the same period last year. It fell short of the market forecast of 22.5 to 23.4 billion KRW," adding, "However, sales recorded 237 billion KRW, up 28% year-on-year, meeting expectations." They then revised downward the earnings forecasts for this year and next year, as well as the target price, reflecting the third-quarter results.

Researcher Lee explained the reason for the operating profit decline: "There was a one-time additional construction cost for the Barossa floating production storage and offloading facility (FPSO) delivered to India on the 1st. After signing a hull construction contract worth 347.7 billion KRW in April 2021, the delivery was successfully completed after two and a half years," adding, "The additional construction costs incurred in the third quarter may be recognized as operating profit upon future settlement. Considering this, the third-quarter results are judged to be at the expected level."

He forecasted that new domestic and overseas order momentum will be in full swing from the end of the year. Researcher Lee analyzed, "Domestically, a fixed-price bid for a total of 1,500 MW closed on the 10th. Among them, the Anma offshore wind power project has already signed a Prior Supply Agreement (PSA), and the selection of the successful bidder is certain, with the main contract expected to be signed within next month," adding, "There is also a possibility of winning orders for other projects such as Shinan Ui offshore wind power and Wando Geumil offshore wind power."

He continued, "Overseas, although slightly delayed compared to expectations, the 'Round 3' tender in Taiwan, a 15 GW mega project expected to secure large-scale orders through 2030 and beyond, is expected to start early next year," and added, "Meanwhile, to overcome the limitation of 'production capacity stagnation,' SK Ocean Plant formed the 'SK Ocean Plant Offshore Wind Alliance' with domestic subcontractors, securing an additional 1.85 million square meters (approximately 560,000 pyeong) of external manufacturing sites and additionally establishing production capacity equivalent to 50% of the existing factory. Additional sales from this are expected starting in 2025."

Researcher Lee noted, "SK Ocean Plant's stock price recently underperformed due to delays and cancellations of some wind power projects amid prolonged high interest rate trends, production disruptions and quality issues caused by equipment supply shortages, and profitability deterioration issues, which led to a sharp decline in global wind power company stocks," but added, "However, with the US Consumer Price Index (CPI) falling faster than expected this month and US Treasury yields plunging accordingly, the company's stock price is expected to start rebounding along with future order momentum."