[Click eStock] "SK Ocean Plant, Profitability Falls Short of Expectations... Target Price Down"

Target Price Downgraded from 25,000 Won to 21,000 Won

Shinhan Investment Corp. on the 21st lowered the target price for SK Ocean Plant from 25,000 KRW to 21,000 KRW, stating that achieving large-scale new offshore wind power orders is necessary to dispel doubts about growth potential. The investment rating was maintained as 'Buy.'

Park Kwang-rae, a researcher at Shinhan Investment Corp., explained, "The target price was lowered reflecting changes in earnings estimates and valuation methods," adding, "Uncertainty in the offshore wind power industry has been affecting results since the second half of last year, and only by securing large-scale orders can doubts about the industry's and company's growth potential be resolved."

SK Ocean Plant's Q4 results last year showed sales of 211.2 billion KRW, a 26.8% increase year-on-year, and operating profit of 10.5 billion KRW, a 16.1% decrease, falling short of market expectations (sales of 223.5 billion KRW, operating profit of 17.1 billion KRW). Park noted, "An additional cost of about 3.5 billion KRW was reflected in indirect expenses, impacting the poor performance," and analyzed, "Even considering the indirect cost issues and recurring one-time expenses each quarter, profitability fell short of expectations. Offshore wind power sales, which have good profitability, decreased by 13.6% from Q3 to 120.5 billion KRW, suggesting a somewhat deteriorated sales mix."

Shinhan Investment Corp. estimates SK Ocean Plant's performance this year at sales of 1.03 trillion KRW and operating profit of 77.3 billion KRW, representing increases of 11.4% and 2.3% respectively compared to the previous year. Park said, "Sales are expected to meet the company's target of 1 trillion KRW, but operating profit is expected to remain at last year's level, with an operating margin worsening by 0.7 percentage points to 7.5%. This is because offshore wind power sales are expected to maintain last year's level at 496.7 billion KRW, while relatively less profitable special ship sales are expected to increase by 91.8% to 368.3 billion KRW."