SK Securities: “SK Innovation’s value to increase with refining in short run and EV battery in long run”


According to the report issued on April 30, researcher Park Han-saem from SK Securities said, “SK Innovation’s value will increase thanks to the improvement of the refining business in the short run, and the expansion of the EV battery and separator business in the long run.” “SK Innovation’s value is evaluated at 37.5 trillion KRW and the target stock price is 350,000 KRW for a new coverage with recommended buy.”


In addition, researcher Park pointed out, “SK Innovation’s Q1 revenue and operation profit estimates are 9.9192 trillion KRW and 653.1 billion KRW respectively showing a business record much above the consensus.” “In this quarter, due to the rising oil price (Dubai crude oil price increased from 44.6 US dollars to 60.59 US dollars per barrel), there is a strong regain in the refining business sector, accompanied with inventory profits and strong battery sector business.” He also added, “Moreover, the comprehensive refining business margin is increased from around 1 USD to 3 USD per barrel.” “As the COVID-19 vaccination is accelerating, there is an increase in the profit margin of gasoline prices, and we need to pay special attention to how the overall margin is improved in the future.”


Researcher Park continued, “The expansion of EV batteries and separator business have brought a high expectation on improved business record.” He specified, “In case of EV battery business, following the construction of the first two plants in Georgia, USA (total annual CAPA is 21.5GW), new factories are also being expected.” “Besides, SK IE Technology, a subsidiary of SK Innovation, announced a factory expansion in Europe (total annual CAPA will increase from 680 million ㎡ to 860 million ㎡).” “SK IE Technology’s listing has started at the top of the public offering, and there is room for multiple increase. At the same time, expectations for earnings growth will continue due to robust captive supplies.”


In the same report, researcher Park said, “In addition to recovering from the downturn of refining business due to COVID-19, SK Innovation is expected to continue to add a premium on its stock price due to the growth of EV battery and separator business.” “Moreover, the company’s value can further increase as its EV battery business is going to turn to surplus due to successive expansions and increasing orders.”


On the other hand, researcher Shin Seung-jin and others from Samsung Securities pointed out in a report dated May 3 that SK Innovation can be one of “the strongest stocks in May.” The researchers went on, “The winners in the Q1 business record are businesses that are sensitive to economic conditions such as refining.” “The [refining] industry would continue to have earning surprises that exceed market estimation thanks to the recovery forward demand and widening spreads.” Researcher Shin and others emphasized, “The supply of intermediate goods is unable to keep up with demand due to the normalization of economic activity following the COVID-19 vaccination and recovery of consumption faster than expected.” They predicted, “It is highly likely that the record-breaking performance cycle of economically sensitive stocks will continue throughout the year.”

Author | Yoon Jinsik
Industry Journalist