Market sentiment toward SK Innovation is beginning to shift as rising global oil prices and expanding demand for energy storage systems (ESS) in the United States improve the company’s growth outlook.
For months, investor concerns had centered on continued losses at battery subsidiary SK On. However, analysts are increasingly highlighting improving earnings in SK Innovation’s refining and energy businesses, alongside growing opportunities in the ESS sector, as key drivers that could support a broader corporate revaluation.
On May 11, iM Securities upgraded SK Innovation’s investment rating from “Hold” to “Buy” and raised its target price to 190,000 won, suggesting additional upside potential of roughly 40% from recent trading levels.
The securities industry is paying close attention to improving profitability in the company’s energy operations. Heightened geopolitical tensions in the Middle East have pushed both international crude oil prices and refining margins higher, strengthening earnings prospects for the refining business. Analysts also expect the company’s exploration and production (E&P) operations to directly benefit from higher oil prices.
Industry observers note that SK Innovation’s energy portfolio is particularly well positioned in a high-oil-price environment. Crude oil produced from its fields in China and Vietnam is sold under pricing structures linked to Brent crude benchmarks, potentially amplifying profit gains as oil prices rise.
Expectations are also improving for SK E&S, the group’s power and gas business unit, in the second half of the year. Rising oil prices could push up Korea’s system marginal price (SMP), which determines wholesale electricity prices, while the company’s liquefied natural gas (LNG) procurement structure — centered on supplies from the United States and Australia — is seen as limiting exposure to Middle East-related cost volatility.
The commercial launch of Australia’s Barossa gas field is also viewed as a positive development. LNG secured from the project is expected to support domestic power generation in Korea, improving both fuel supply stability and profitability.
Despite these positives, SK On’s electric vehicle battery business remains a short-term burden. Slowing growth in the US EV market, changing subsidy policies, and cautious investment strategies from automakers have delayed the pace of earnings recovery.
Still, investors are increasingly focusing on the possibility that SK On could expand beyond EV batteries into the ESS market. Demand for large-scale power storage systems is rapidly increasing alongside the expansion of solar energy projects and the growing number of AI data centers in the United States.
SK On has already converted part of its US battery production lines for ESS manufacturing and is actively pursuing additional orders. Industry experts believe ESS demand could accelerate further as AI data centers require more stable and resilient power infrastructure.
Jeon Yoo-jin, an analyst at iM Securities, said concerns over SK On’s losses had previously overshadowed the group’s broader business strengths, but sentiment is now changing as earnings improvements in the energy business and growth potential in ESS become more visible.
“As profitability improves in refining and power generation while ESS emerges as a new growth engine, the company could gradually ease its financial burden,” Jeon said.
