01 | Good performance is expected to continue in the next quarter

IBK Securities’ analyst, Jeon Chang-hyeon predicted in a report dated May 24^th that “This year, SK Innovation’s oil refining business will bounce back, while its battery business will continue to grow further.” “SK Innovation’s refining business, which was dragged down by the COVID-19 pandemic, is expected to get back on track, achieving a turnaround in its annual profit this year,” he added.

Regarding the EV battery business, Jeon forecast, “It will continue to grow and become even more profitable as a result of the company’s global expansion.” He explained, “SK Innovation’s aggressive expansion in battery production, and order backlog worth KRW 80 trillion (600GWh) will play a significant role in boosting its battery sector.” “Furthermore, the company is expected to increase its EBITDA in 2021 and have earn profits in 2022.”

In addition, Jeon commented in the report, “SK Innovation’s revenues and operating profits in Q2 will reach KRW 10.396 trillion (up 44% YoY), and KRW 513 billion (turnaround) respectively.”

Analysts from Hana Financial Investment, Yoon Jae-sung and Ha Jae-seon predicted in their report, which was also released on the 24^th, “The global supply and demand of petroleum products is highly likely to bounce back in the light of rising demands in the travel sector that had been suppressed due to the COVID-19 pandemic and the shut down of global petroleum refineries.” “PX (paraxylene), a major petrochemical product of a refinery, should also improve as apparel and downstream demand recovers.”

They also emphasized, “As COVID-19 vaccines are being widely rolled out, global petroleum supply and refining margins will show markedly upward trends, provided that there is a further upturn in global freight traffic and travel.”

02 | Forming an EV battery JV with Ford is a strong boost

SK Innovation and Ford’s decision of forming an EV battery joint venture is definitely a good news that raised the market’s expectation.

In a report on the 25th, a few days after the announcement of SK Innovation and Ford’s JV, Lee Anna, a researcher at EBEST Investment & Securities, said, “We look forward to SK Innovation’s aggressive investment in EV batteries business in the future.” Lee also predicted, “SK Innovation’s EV battery business will be able to realize its first break-even point (BEP) in 2022, and then hit middle single digit profit in 2023, and high single digit profit in 2024.”

Researcher Jeon Yoo-jin of Hi Investment & Securities assessed the fair value of SK Innovation’s EV battery business at KRW 11.2 trillion (30 times the 2021-2022 EBITDA) in a report dated May 26^th. She explained, “In the EV battery market, where the oligopoly will become more pronounced around the top-tier in the future, SK Innovation has demonstrated its ability to acquire new major global OEMs (establishment of a JV with Ford, etc.).” In addition, “As SK Innovation has clearly demonstrated its EV battery business capabilities with large-scale orders and making alliances, we expect the company’s global market share to expand rapidly.”

In a report on May 27^th, researcher Noh Woo-ho of Meritz Securities predicted, “The annual average growth rate of SK Innovation’s EV battery business from 2021 to 2023 will be 58%, the highest among Korean battery makers.” “The company’s battery business will gain profit in the second quarter of 2022,” he added.

There are also some highlights in Ford’s presentation for investors on May 26^th (US local time) that can bring positive effects on SK Innovation’s EV battery business, directly and indirectly. Ford announced that it will boost investment for electrification, including battery development, to more than $30 billion by 2025. This amount of investment is about one-third more than that of the previous plan revealed earlier this year, which was USD 22 billion.

Moreover, Ford outlined a plan to produce its own battery. The automaker expects its battery demand to reach 240 GWh per year globally by 2025, with 140GWh for the U.S. market. To meet this demand, obviously the giant automaker has to secure more EV battery facilities. Accordingly, Ford’s decision to form BlueOvalSK, a JV with SK Innovation “to manufacture battery cells and arrays at two plants in the U.S. for future Ford and Lincoln vehicles” can definitely help the company to boost its battery production

Meanwhile, Ford’s F-150 Lightning electric pickup Truck, which will be equipped with SK Innovation’s EV battery, was reported to have hit more than 70,000 pre-orders in about one week after being unveiled on May 19^th.