SK Innovation's stock price rose for four consecutive days, surging more than 54% compared to its 52-week low. This appears to be influenced by news of orders secured by its subsidiary SK On. Shareholders of SK Innovation, whose investment funds have been tied up for several years since the pandemic, are now paying close attention to a potential re-rating. Analysts at securities firms view the order news from SK On as positive but predict that the absorption merger with SKIET will be negative for SK Innovation.
According to data from Korea Exchange on the 1st, SK Innovation closed the day up 9,800 won (7.81%) at 135,300 won compared to the previous day. This stock price level is the highest since May 7 based on closing prices. It represents a 54.3% increase from the 52nd-week low of 87,700 won recorded on June 26.
SK Innovation showed strength for four consecutive trading days. Analysts attribute this recent rally to news of orders secured by its subsidiary SK On.
On the 27th of last month, SK On signed a supply contract for ESS batteries with NeoVolt Power, a U.S.-based manufacturer of energy storage systems (ESS). The agreement covers the supply of 9GWh (gigawatt-hours) of lithium iron phosphate (LFP) pouch battery cells over five years from 2027 to 2031. Industry sources estimate the value of this supply contract at approximately 1.5 trillion won.
SK On is also pushing for an additional cooperation agreement with NeoVolt Power later this year, covering a scale of 9GWh. If this contract is finalized, the total cooperation between the two companies will expand to 18GWh.
Securities firms are interpreting this order as a positive event. However, news regarding the merger between SK Innovation and SKIET is being evaluated as negative for SK Innovation's stock valuation.
Jeon Yu-jin, a researcher at iM Securities, stated, "What draws more attention than this 9GWh contract is the possibility of additional contracts for direct sales by SK On." He added, "A scenario where ESS is supplied to power plants within the group is also quite possible." The researcher continued, "However, this ESS contract alone will absolutely be insufficient to resolve dissatisfaction and anxiety regarding support for SK On and SKIET."
Lee Jin-myung and Kim Myeong-ju, researchers at Shinhan Investment Corp., said, "While improvements in performance and cash flow centered on petroleum refining and lubricants are valid, key factors include reducing battery losses, expanding ESS orders, decreasing net debt, and normalizing SKIET." They also noted, "Due to uncertainties surrounding the merger, the pace of short-term revaluation is likely to be limited."
Meanwhile, SK Innovation surged sharply in 2020 when interest in secondary batteries became prominent. At the beginning of 2021, its stock price reached the 320,000 won range. The increase during this period amounted to approximately 490%. Compared to that peak, the current stock price is less than half.
SK Innovation's sharp decline was caused by an electric vehicle (EV) caesum (demand stagnation). As demand for EV batteries slowed, the industry faced a downturn characterized by reduced operating rates and declining profitability. SK On, SK Innovation's subsidiary, also saw its financials deteriorate due to losses. Consequently, SK Innovation implemented a rebalancing among group affiliates to improve the situation. It absorbed its cash cow, SK E&S, into an internal independent company (CIC), followed by sequentially merging SK Trading International, SK Entum, and SK Enmove into SK On to strengthen cash flow.
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