[Stock of the Week] SK Innovation Projected to Achieve Record Results This Year

Boom in Refining and Lubricants Drives 56% Stock Surge This Year
Annual Operating Profit Expected to Top 10 Trillion Won
Mergers and Divestitures of Subsidiaries May Weigh on Corporate Value

Editor's Note
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SK Innovation continues to deliver sharp improvements in performance and a steady rise in its stock price, driven by the boom in its refining and chemical businesses, the positive synergy from the SK E&S merger, and the turnaround of its battery subsidiary, SK On. Even amid oil price and exchange rate volatility stemming from geopolitical uncertainty, the company has successfully achieved structural rebalancing across the entire energy value chain, raising market expectations for a rerating to an all-time high.

According to the Korea Exchange on September 30, the share price of SK Innovation has risen by 56.32% this year. Just in September alone, it jumped 26.06%, far outpacing the KOSPI, which edged up by only 1.02% in the same period.

Market-watchers attribute this surge to improving business fundamentals fueling the share price rally. Securities experts forecast that SK Innovation’s annual operating profit will surpass 10 trillion won this year, setting a new all-time record. According to the financial information provider F&Guide, the consensus forecast (the average of brokerage estimates) for SK Innovation’s 2026 full-year results stands at 104.7559 trillion won in revenue and 9.2984 trillion won in operating profit. Some brokerages expect operating profit to exceed 10 trillion won, easily beating consensus.

Hana Securities projects SK Innovation’s operating profit this year to jump 2,821% year on year to reach 11.8 trillion won, marking a record high. Hana Securities analyst Yoon Jaesung said, “SK Innovation’s Q3 operating profit this year is expected to be about 3.1 trillion won, 65% above consensus of 1.9 trillion won. This is largely because SK E&S and the lubricants division are both set to post all-time high operating profits of 800 billion won and 1.23 trillion won, respectively, while the petroleum business also continues to perform robustly.” He added, “Opportunities in LNG trading and rising system marginal price (SMP) will drive SK E&S’s annual operating profit to around 2 trillion won, exceeding the 1.7 trillion won in 2022 during the Russia–Ukraine war. For SK Innovation overall, the company’s annual operating profit this year is projected at an unprecedented 11.8 trillion won.”

iM Securities also forecasts SK Innovation’s annual operating profit at 10.441 trillion won this year, seeing the 10 trillion won threshold as well within reach. iM Securities analyst Jun Yoojin commented, “Given the sustained geopolitical conflicts, higher oil prices, robust refining margins, and elevated SMP levels, SK Innovation could easily achieve 10 trillion won in operating profit even in 2026.”

However, restructuring moves such as the merger with SK IE Technology, the sale of SK City Gas Holdings, and the potential suspension or closure of SK Geo Centric’s naphtha cracking center (NCC) create headwinds. Stock dilution and pains from asset sales or facility closures, which arise in the course of business restructuring, could become variables for the company’s future share price. In fact, after SK Innovation announced its merger with SK IE Technology in August, its stock plunged by 11%.

Yuanta Securities analyst Hwang Kyuwon noted, “The merger process of SK IE Technology (the separator subsidiary) was announced in August as a small-scale merger, resulting in the number of shares issued by SK Innovation being diluted by 2.6%. Then, in Q4, SK City Gas Holdings (responsible for city gas) is expected to be sold to global private equity firm KKR. With the redemption of 3.2 trillion won of redeemable convertible preference shares issued five years ago, the enterprise value will decrease. In 2027, SK Geo Centric (chemical subsidiary) may halt or close operations of its 660,000 ton NCC. This is part of the Ulsan general-purpose petrochemical restructuring led by the government, affecting assets valued at about 1 trillion won on the balance sheet.”

The analyst added, “The merger of SK IE Technology announced at the end of August poured cold water on the bullish momentum, fueling disappointment and inconvenience among shareholders. The repeated financial support for loss-making subsidiaries could eventually result in SK Innovation trading at a structural discount over the medium to long term.”

Further upside in the stock will depend on narrowing battery losses and reductions in net debt. Shinhan Investment & Securities analyst Lee Jinmyung commented, “The improvement in results and cash flow centered on refining and lubricants businesses remains solid. However, further gains depend on decreasing battery losses, expanding orders for energy storage systems (ESS), reducing net borrowings, and normalization of SK IE Technology.”

This content was produced with the assistance of AI translation services.