SK Innovation: 2Q beat, with 3Q lubricant spreads trending even higher. Battery right-sizing paves a path towards profitability

Research evidence excerpt

SK Innovation: 2Q beat, with 3Q lubricant spreads trending even higher. Battery right-sizing paves a path towards profitability

ion activities including the recent

downsizing of loss-making plants. Management expects further improvement Key Changes (FYE Dec)

in core earnings in 2H26. They expect the recent California EV subsidies to Prev Cur Δ

improve 2H demand, and target 20 Gwh of ESS order win. Company plans to Adj. EPS - 26E (W) 16,319 14,877 -8.8%

supply its recent 1.8 Gwh ESS project from 3Q27 via the Seosan line, and aims

to win a large portion of the 3rd Korean government ESS tender. Quarterly Forecasts (FYE Dec)

Adj. EPS (W)

• Strong lubricants beat, July Group III spread >50% higher than 2Q avg: 2025A 2026E 2027E

SK Enmove reported 2Q OP of W692bn (+267% q/q, +414% y/y), with OPM Q1 (1,468) 5,783A 2,209

more than doubling q/q to a record-high of 35%. As we highlighted in our May Q2 (4,958) 1,289A 2,001

Q3 (693) 3,467 1,798

14 report, SK Enmove is the global #1 Group III base oils supplier and might Q4 (14,383) 4,338 3,139

benefit from the Pearl GTL Train 2 outage and recurring tensions in the Middle FY (21,502) 14,877 9,146

East (JPM note). As shown in Figure 1, while Group I/II LBO spreads have

Style Exposure started to decline from the Apr-Jun peak, Group III LBO spreads have

continued to rise given the concentration of Group III capacity in the Middle

East (27% of global, of which Pearl GTL Train 2 accounts for 10%). In the

mid-LT, we see upside from Enmove’s foray into thermal management

solutions. The company has already commercialized immersion cooling ESS

for marine and defense applications, and is currently seeking global

certifications and conducting real-world testing for data centers and EV battery

applications.