First Read SK Innovation: Strong 2Q beat driven by SK On recovery

研报英文原文证据摘录

First Read SK Innovation: Strong 2Q beat driven by SK On recovery

Forecast returns

Forecast price appreciation 9.6%

Forecast dividend yield 1.8%

Forecast stock return 11.4%

Market return assumption 9.0%

Forecast excess return 2.4%

Company Description

SKI has a global EV battery footprint with capacity in South Korea, Hungary and China, with

US expansion plans. Key customers include Hyundai, Daimler and VW. In China SKI has a joint

venture with BAIC. We expect the company to rank in the top five for global EV battery

market share by 2024. SK Innovation is 33%-owned by SK Holdings. SKI's core business is

integrated oil and chemical, with overseas upstream exploration and production (E&P)

projects. It has one of the largest oil refining capacities in the world. It has 1.1mbpd of

refining capacity, accounting for about 40% of Korea's total refining capacity.

Valuation Method and Risk Statement

We base our price target on a sum-of-the-part methodology. Accidents and unexpected

shutdowns for maintenance are an inherent risk for oil refining and petrochemical

production. Disruption of operations due to accidents could result in significant losses. Key

drivers of oil refining, such as oil prices and refining margins, can be volatile, highly cyclical

and seasonal. Therefore, changes in global GDP growth or seasonal demand could materially

change our earnings estimates. Government intervention in refining product pricing when

the oil price rises could result in margin pressure or losses. In the event of a sharp fall in oil

prices, SKI’s upstream oil production business could face significant asset writedowns and this

would negatively impact profitability. With high energy densities and temperatures EV

batteries are inherently dangerous.