Daily Brief Energy/Materials: SK Innovation, Adaro Energy, Tata Steel Ltd and more

• SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation’s market cap of 17 trillion won. 
• The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.
• Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adaro Minerals
• Greenland Holdings Corp
• Longfor Properties
• UPL Ltd

Tata Steel’s Q2/22-23 results were weak as expected, albeit the company outperformed most of the industry. While many peers posted record losses, Tata Steel still achieved a profit, with reasonable EBITDA/ton. That said, the financial risk profile has deteriorated, with lower earnings and given large cash outflows for the Neelachal Ispat Nigam Limited acquisition. Liquidity is weak.

We revise downwards our forecasts for revenue growth and margins, to reflect the deteriorating performance. We expect Tata Steel to continue facing pressure, given the weak industry dynamics. That said, the company should also continue to outperform peers, given its scale and deep vertical integration.