SK Securities cuts target price for SK innovation due to battery unit losses

[Courtesy of SK innovation]

South Korea’s SK Securities Co. revised down the target price for SK innovation Co., citing the continued quarterly losses faced by its electric vehicle (EV) battery subsidiary SK on Co. The adjusted target price was cut to 220,000 won ($163) from 255,827 won.

There are expectations for improved refining margins in the third quarter due to a sharp increase in downstream prices but SK on’s ongoing operating losses are anticipated due to subdued demand from key customers, such as Ford and Volkswagen, said SK Securities Analyst Kim Do-hyun in a report.

Specifically, in the second and third quarters of this year, Ford suspended production for capacity expansion, resulting in a significant operational loss for SK on, amounting to 168.9 billion won in the third quarter. The operating loss widened compared to the 132 billion won loss in the previous quarter.

SK innovation is projected to post a third-quarter operating profit of 1.2 trillion won, marking a return to profitability compared to the previous quarter, but the target price reduction is attributed to the adjustment of earnings estimates, Kim said.

The analyst expects that the fourth-quarter operating profit of SK innovation will decline by about 300 billion won compared to the third quarter, with an estimated operating profit of 824 billion won.

Nevertheless, Kim maintained his “buy” rating as he remains optimistic about the company’s prospects for next year, anticipating improvements in demand from Volkswagen, as well as the expansion of production volumes through the acquisition of new customers.

On Thursday, SK Innovation shares closed at 146,800 won, up by 2.8 percent from the previous trading day.