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[Alpha Biz=(Chicago) Reporter Paul Lee] Meritz Securities lowered SK Innovation's target stock price from 210,000 won to 170,000 won on the 24th, saying that SK On, a major subsidiary of SK Innovation, will suffer from sluggish profitability this year. The investment opinion remained 'buy'.
Meritz Securities estimated in a related report that SK Innovation suffered an operating loss of KRW 11.2 billion in the fourth quarter of last year, falling short of market expectations.
"Despite strong sales related to Ford, its subsidiary SK On is estimated to have suffered an operating loss of 198.1 billion won as it failed to turn into a surplus due to falling sales unit prices and reflection of some facility fixed costs," Meritz Securities said, explaining the background of the poor performance.
In addition, SK Innovation's oil refining and chemical business also said, "Profitability has been sluggish due to increased volatility in oil prices at the end of the year and inventory asset valuation losses due to off-season demand."
In particular, the profitability problem of its subsidiary SK ON is expected to continue this year.
"Major customers have already halved their expected annual sales volume this year, which is a sign of sluggish demand," Meritz Securities said. "SK On is unlikely to switch to an annual surplus as it expects to post an operating loss of KRW 531 billion this year."
Reflecting this situation, Meritz Securities lowered the business value of SK Innovation's subsidiaries SK On and SK IE Technology to KRW 20.9 trillion, lowering the appropriate target price to KRW 170,000.
AlphaBIZ 폴 리(hoondork1977@alphabiz.co.kr)
