[Edaily Reporter Kim Hyung-il ] Yuanta Securities Korea forecast a significant improvement in earnings for SK Innovation(096770), stating that the positive impact of improved performance in the refining and lubricants divisions will outweigh the decline in corporate value resulting from restructuring. The firm also raised its target price from 170,000 won to 200,000 won.

On the 15th, Hwang Kyu-won, an analyst at Yuanta Securities Korea, stated, “The earnings windfall in 2026 is expected to be much larger than anticipated,” adding, “The projected annual earnings are 102.2 trillion won in revenue, 10 trillion won in operating profit, and 3.6 trillion won in net income attributable to controlling shareholders.” He forecast an operating profit margin of 9.8%.

Hwang cited the “triple tsunami effect” as the reason behind the earnings improvement. His analysis indicates that global supply and demand are facing a 14% disruption due to a 4–6% disruption in crude oil supply caused by delays in the Iran conflict, a 2–3% delay in the restart of petrochemical facilities in the Middle East following damage, and a 3–4% disruption caused by damage to energy facilities resulting from the Russia-Ukraine war.

Operating profit by segment is projected at 6.2 trillion won for oil refining, 2.2 trillion won for lubricants, 954.4 billion won for E&S, and -96.4 billion won for batteries. Operating profit for oil refining is projected to increase significantly from last year’s 349.9 billion won, while lubricants are expected to rise from last year’s 607.6 billion won. E&S is forecast to increase from last year’s 681.1 billion won, whereas the battery division is expected to see a reduction in its operating loss compared to last year’s 923.5 billion won.

SK Innovation’s restructuring is expected to continue from the second half of 2026 through 2027. Analyst Hwang explained, “Following the merger with SK E&S in 2024 and the downsizing of SK On in 2025, three additional restructuring measures remain to be implemented from the second half of 2026 through 2027.”

First, he highlighted the merger with SK ie technology. The merger process was announced last August, and he projected that the number of outstanding shares would be diluted by 2.6% as a result of this small-scale merger.

The sale of SKGas Holdings was also cited as a key factor. Researcher Hwang projected that SKGas Holdings would be sold to KKR, a global private equity (PE) firm, in the fourth quarter. He anticipated that the company’s enterprise value would decline due to the in-kind settlement of 3.2 trillion won worth of redeemable convertible preferred shares issued five years ago.

He also cited the restructuring of SK GeoCentric’s 660,000-metric-ton NC facility as an example. The outlook is that this facility may be idled or shut down in 2027. This is related to the government’s restructuring of the general petrochemical sector in Ulsan, and the book value of the facility is approximately 1 trillion won.

However, Yuanta Securities Korea judged that the positive impact of improved earnings in the refining and lubricants segments would outweigh the decline in enterprise value resulting from the restructuring. Analyst Hwang stated, “The amount of free cash flow generated from operating activities is estimated to be 4.5 trillion won in 2026 and 1.5 trillion won in 2027,” adding, “This return to positive cash flow after five years will lead to an improvement in the company’s financial structure.” He further predicted, “Consolidated net debt is expected to decline from 29 trillion won in 2024 to 24 trillion won in 2025, 20 trillion won in 2026, and 18 trillion won in 2027.”