[Click eStock] SK Innovation, Battery Market Slump Continues... Target Price ↓

On the 3rd, Samsung Securities downgraded the target price for SK Innovation to 140,000 KRW, citing continued weakness in the battery sector in the fourth quarter, while maintaining a 'Buy' investment rating.

Researcher Cho Hyun-ryeol stated, "We expect the operating profit for the fourth quarter to turn positive from the previous quarter to 191.7 billion KRW," adding, "From November, the merger effect of E&S is expected to contribute 121.1 billion KRW in profit, but this will be partially offset by a return to losses in the battery segment and an expansion of losses in battery materials."

Cho forecasted, "The battery business in 2025 is expected to perform worse than anticipated," and said, "Operating profit for SK On, excluding the merger with SK Trading International and SK Entum, is expected to be -968.1 billion KRW in 2024 and -61.2 billion KRW in 2025."

He noted, "IRA AMPC is expected to recover to 942.3 billion KRW, a 233% increase from the previous year, but excluding IRA AMPC, the profit is projected to be -1 trillion KRW, indicating a slow reduction in losses," explaining, "This is due to sluggish electric vehicle sales from major customers and policy risks causing adjustments in electric vehicle launch schedules."

However, despite the battery sector's weakness, the merger effect with E&S is viewed positively.

Researcher Cho said, "We reflected the corporate value from the SK E&S merger and the increase in the number of shares in our evaluation, but also incorporated a downward adjustment in business value due to a decline in the equity value of the separator subsidiary and reduced profits in the petrochemical business, resulting in a 7% cut in the target price to 140,000 KRW."

He added, "The battery business still struggles to achieve EBITDA profitability excluding IRA AMPC, so we only factored in 4.6 trillion KRW, which is 30% of the expected cash inflow value from IRA AMPC. However, through this E&S merger, the company has successfully diversified its energy portfolio beyond batteries and partially improved its profit-generating capability."