[Click eStock] "SK Innovation, Ultimately Stock Price Depends on SK On's Performance"

Merger with SK E&S Positive in the Long Term
Ultimately, Stock Price Depends on 'Painful Point' SK On
SK On's Q3 Profit, Q4 Loss Fluctuations

Hana Securities analyzed on the 5th that ultimately SK Innovation's stock price depends on SK On's performance. They maintained a 'Buy' rating and a target price of 130,000 KRW. SK Innovation's closing price on the previous trading day was 121,100 KRW.

Researchers Yoon Jae-sung and Kim Hyung-jun of Hana Securities stated, "Global refinery capacity net additions are expected to decrease from 2025, with 2023-24 being the peak years," adding, "Considering the potential decline in exports from China, the US, and India, the refining industry outlook can gradually improve from 2025." They also said, "The SK Innovation-SK E&S merged corporation, launched on the 1st, is very positive from a mid-to-long-term synergy perspective as it can simultaneously operate Oil and Gas businesses. However, ultimately, the stock price depends on SK On's performance improvement, and a new target price for the merged corporation will be presented around the listing date of the merger new shares on the 20th."

According to Hana Securities, SK Innovation's operating loss in Q3 was 423.3 billion KRW, significantly below the consensus of a 292.8 billion KRW loss. This was due to a turnaround to a surprise profit in the battery segment but a return to losses in the petroleum and chemical segments. In Q4, an operating profit of 191.3 billion KRW is expected, marking a return to profitability. The battery segment is expected to revert to losses, but petroleum and chemicals are expected to improve.

Researchers Yoon Jae-sung and Kim Hyung-jun said, "Inventory-related losses incurred in the previous quarter have been eliminated, and the lagging effect has been removed. Additionally, recent increases in refining margins and exchange rates have been observed," adding, "The chemical segment can also achieve a slight return to profit as approximately 25 billion KRW of inventory-related losses from the previous quarter are eliminated and the exchange rate increase effect is reflected." Furthermore, in Q4, sales volume expansion centered on factories in China and Europe is expected to contribute to reducing the deficit.