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SK innovation(284,000 -4.22%) Shareholders were calm throughout the last Lunar New Year holiday. This is because the US’s International Trade Commission (ITC) in the early morning of the 11th brought out the results of a lawsuit for infringement of trade secrets between LG Chem and SK Innovation, and it was almost as if the stock price fell sharply. ITC ordered SK Innovation to stop importing electric vehicle batteries in the US for 10 years.
Concerns seemed to be a reality at the same time quote before the start of the market on the 15th. SK Innovation’s share price is expected to fall by more than 25%. As the market start time was approaching, the drop fell to -10%. 9 o’clock. The stock price started at 275,000 won, down -7.25% from the previous day. The decline gradually decreased. The interpretation of the lawsuit is mixed. In the securities industry, the negative argument that “the uncertainty has increased” and the positive argument that “the opportunity to buy at a low price” stood tight. On this day, SK Innovation closed the transaction at 284,000 won, down 4.22%. The public opinion is that the fall was not as big as expected.
Securities companies that are disagreeable are paying attention to the amount of settlement money. It is expected that SK Innovation will be able to secure 2~3 trillion won in cash assets through the listing of SK I Technology (SKIET) and the sale of shares in the lubricant base oil business in 1H. However, the fact that the debt-to-equity ratio is 149% as of 4Q is a burden. The refinery business is still in the red due to Corona 19. This is why some point out that the investment capacity to be poured into the battery has been damaged. Hwang Yoo-sik, a researcher at NH Investment & Securities, pointed out that “depending on the size of the agreement, financial stability and credit rating may be shaken. If the agreement is delayed, the negative impact on the business will increase due to deteriorating orders.”
There are also concerns about prolonged lawsuits. To reach an agreement, SK Innovation must acknowledge the infringement of trade secrets. However, SK Innovation’s position is that ITC has not actually disclosed the infringement of trade secrets. Kang Dong-jin, a researcher at Hyundai Motor Securities, said, “There will be difficulties in the process of agreement,” and pointed out that “there is a possibility that the lawsuit will be prolonged.”
Those who are optimistic are paying attention to the increased possibility of consensus. This is because it has become difficult for SK Innovation to continue its US business without agreement. The Korean government is also emphasizing the smooth agreement between the two companies. If the government actively mediates, it is difficult for LG Chem to be passive about the agreement. Baek Young-chan, a researcher at KB Securities, said, “As the likelihood of an agreement has increased, the uncertainty has decreased.”
Some analysts say that SK cannot give up the US battery business at the group level, considering sunk costs and long-term growth potential. Kim Jeong-hwan, a researcher at Korea Investment & Securities, explained, “Eco-RoBM, SKC, Dongwha Corporation, and other SK innovation value chains have increased uncertainty, but SK will not give up the battery business in the US.” Samsung Securities also viewed this share price correction as a buying opportunity because concerns about its mid- to long-term business were limited.
In the battery industry, some analyzes say that it will be a long-term boost for the Korean battery industry. This is because it can set a precedent for Chinese battery makers such as CATL from entering the US market. The problem of manpower outflow is so great that it is possible to talk in Korean at the CATL Institute. An industry official explained, “After all, there are many stories that this lawsuit is aimed at keeping China in check in the long term.”
Reporter Yoonsang Ko [email protected]
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