On Tuesday, HSBC updated its financial outlook on SK Innovation Co Ltd (096770:KS) shares, increasing the price target to KRW100,000 from the previous KRW95,000. The firm has maintained a Reduce rating on the stock.
This adjustment comes as HSBC revises its operating profit estimates for 2024 and 2025 upwards by 7% and 22%, respectively. The revised estimates are based on expectations of higher profit margins from the company's battery operations.
The analyst at HSBC noted that the price target increase reflects an improved forecast for SK Innovation's battery division margins. Despite this positive revision, the Reduce rating was reiterated due to several factors that may pose risks to the company's stock price.
These include potential further delays in electric vehicle (EV) production plans by key customers, increasing cost pressures, and a difficult funding environment that could negatively impact the share price going forward.
HSBC's analyst also outlined potential upside risks that could alter the firm's stance on SK Innovation. These include the possibility of more favorable EV-related policies being implemented, stronger demand for EV models from the company's main customers, and the acquisition of new orders for batteries. These factors could provide a boost to the company's financial performance and, consequently, to its stock valuation.
The update from HSBC arrives amid a period of volatility for companies in the EV sector, as they navigate challenges including supply chain disruptions and fluctuating demand. SK Innovation, as a key player in battery production for EVs, is subject to these industry-wide pressures.
As of the last trading session, SK Innovation's stock reflected the market's reaction to various internal and external influences. Investors and market watchers will likely monitor how the company manages the risks and potential opportunities outlined by HSBC in the time to come.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.