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Photo = Yonhap news |
[Alpha Biz= Paul Lee] On July 4, Yuanta Securities revised its target price for SK Innovation from KRW 170,000 to KRW 150,000, citing continued financial strain and a downward revision in earnings expectations. The brokerage maintained its “Buy” rating, with SK Innovation’s previous closing price at KRW 119,300.
According to Yuanta analyst Kyu-won Hwang, SK Innovation is expected to post an operating loss of KRW 442.9 billion in Q2 2024, a deeper deficit driven largely by weak refining margins, despite narrowing losses in the battery segment. A drop of USD 9 in global oil prices and a 50-won strengthening of the Korean won against the U.S. dollar are projected to result in inventory losses of approximately KRW 450 billion.
However, the analyst expects battery segment revenue to grow by 10–15% quarter-over-quarter, supported by the launch of Hyundai’s EV Metaplant in the U.S. This will likely lead to a rise in U.S. Inflation Reduction Act subsidies, amounting to KRW 221 billion in Q2.
Yuanta forecasts SK Innovation’s full-year 2024 revenue at KRW 75.3 trillion, with an operating loss of KRW 296.3 billion—marking a return to negative earnings for the first time in five years.
The report also highlights SK Innovation’s growing financial burden. Capital expenditures are projected at KRW 6.5 trillion for the year, yet operating cash flow is expected to generate only KRW 1.3 trillion, leaving a shortfall of over KRW 5 trillion. Net debt is anticipated to increase from KRW 29 trillion at the end of 2023 to KRW 35 trillion by year-end, with an additional KRW 8.3 trillion in debt obligations still due.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
