[Click eStock] "SK IE Technology, Possible Profit Turnaround in Q1 Next Year... Target Price Down"

Target Price Lowered by 29% from Previous Level

KB Securities on the 7th lowered the target price for SK IE Technology from 38,000 KRW to 27,000 KRW, expecting the company to return to quarterly profitability starting from the first quarter of next year. The investment rating was maintained at 'Hold.'

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is due to an increase in fixed cost burdens caused by delayed recovery in front-end demand, leading us to revise this year's operating loss estimate from 38.8 billion KRW to 100.9 billion KRW. Since there is a 13.9% upside potential compared to the closing price on the 6th, we maintain the investment rating."

SK IE Technology's fourth-quarter results last year showed sales of 59.3 billion KRW, down 66% year-on-year, and an operating loss of 91.9 billion KRW, falling short of consensus (average securities firm forecasts). The researcher analyzed, "Sales increased by 17% quarter-on-quarter due to simultaneous growth in sales to major customers SK On and North American electric vehicle original equipment manufacturer (OEM) orders. However, due to the nature of the separator business, which has a high fixed cost ratio, the burden of fixed costs increased inevitably because of low operating rates, and profitability was weak as a result of a 30.8 billion KRW impairment loss on long-term inventory."

An operating loss trend is expected to continue for the time being. The researcher said, "SK IE Technology plans to prioritize inventory depletion until the second quarter of this year, so regardless of sales volume, the improvement in operating rates is expected to be limited for the time being, and the operating loss trend will continue accordingly."

KB Securities estimated SK IE Technology's performance this year at sales of 358.7 billion KRW, a 65% increase year-on-year, and an operating loss of 100.9 billion KRW. The researcher stated, "Due to weak demand and sales mainly of inventory items, low operating rates and poor profitability are inevitable until the first quarter of this year. However, active order-taking activities have recently borne fruit, and it is expected that at least four or more meaningful customers will be additionally secured within this year, so a continuous improvement trend in operating rates is anticipated. Accordingly, a return to quarterly profitability is expected from the first quarter of next year."