In the earnings report for April 18, Samsung Securities analyst Cho Hyun-ryul expects, “SK Innovation’s Q1 2022 operating profit is going to reach KRW 1,301.8 billion, probably exceeding recently raised consensus by 28%. This earnings surprise derives from the sharp rise in oil prices and bolstered refining margin caused by Russia-Ukraine War.” He suggested the target stock price for SK Innovation as KRW 330,000.
“The Q1 2022 operating profit for SK Innovation’s oil refining business is expected to reach KRW 1,108.3 billion (+404% QoQ),” emphasized Cho in the report. He added, “The refining margin (spot) has been improved by USD 3.9 QoQ, and the rise in oil prices will drive a big rise in inventory-related gains (increased by KRW 427 billion QoQ).” He continued, “In terms of the chemical business, its Q1 2022 operating profit is expected to reach KRW 78.8 billion, making a turnaround. For the battery business, the effect of the operation of new plants is likely to be still valid, and it would contribute to reducing the deficit.”
According to the same report, analyst Cho also forecasts, “For the first-half of the year, the robust performance of SK Innovation refining business will back the consolidated earnings. In the second half, the significant reduction in the deficit of the battery business will work as an additional momentum for SK Innovation’s stock price.”
Prior to this report, Shinhan Investment Corp. analysts Lee Jin-myung and Choi Gyu-heon, stated in their report on April 15, “Due to the sharp rise in global oil prices, large inventory-related gains, and bolstered refining margin, SK Innovation is expected to have the highest quarterly earnings of all time.” Analysts added, “The average quarterly oil price (Dubai) was increased by USD 17 per barrel, and SK Innovation is expected to mark about KRW 560 billion for the inventory-related gains. For the refining margin, tight supply and demand continue along with concerns over the supply, and this trend seems to become a factor for the rise in the margin by USD 4 per barrel.” They continued, “As SK Innovation has raised the operation rate of its refining facilities to 85%, which was only 60% in 2021, it is expected to benefit SK, deriving from the strong performance of the oil refining industry.”
In the report on April 12 by Eugene Investment & Securities analyst Hwang Sung-hyun also stated, “SK Innovation’s Q1 2022 business profit is going to exceed KRW 1 trillion. Since there are rises in global oil prices and refining margin (The Singapore refining margin increased by USD 1.6 per barrel), SK Innovation’s traditional businesses stay bullish.”