SK Eternix rose more than 9% intraday, buoyed by surging global oil prices and positive outlooks from brokerages. The gains are attributed to improved investor sentiment, as expanding geopolitical risk in the Middle East drove oil prices higher, highlighting the cost competitiveness of renewable energy, while expectations for government policy added support.
According to the Korea Exchange, SK Eternix was trading at 56,450 won as of 2:47 p.m. on the 20th, up 4,500 won, or 8.65%, from the previous session. The stock at one point climbed as high as 58,500 won, widening its gains.
The day's rally is seen as a direct result of the surge in global oil prices. Concerns over crude supply disruptions in the Middle East grew as the armed conflict between the United States and Iran expanded to key infrastructure such as bridges, railways, and power plants. Overnight on the New York Mercantile Exchange (NYMEX), August-delivery West Texas Intermediate (WTI) closed at $82.49 per barrel, up 4.48% from the previous session, while September-delivery Brent crude rose 4.59% to $88.10 per barrel.
When global oil prices rise, the cost of fossil fuel-based power generation increases, while expectations grow that the relative price competitiveness of renewable energy such as solar and wind may improve. As a result, buying interest flowed into renewable energy-related stocks broadly, drawing attention to SK Eternix as a beneficiary.
Positive assessments from brokerages also supported investor sentiment. Hana Securities on the 16th of this month raised its target price for SK Eternix by 10% from its previous level to 66,000 won, while maintaining its "buy" investment opinion. It analyzed that while second-quarter earnings could fall short of market expectations as part of solar power project (PPA) revenue is deferred to the third quarter, there is a possibility of further upward revision to earnings estimates if the company's capability to carry out annual solar PPA projects of more than 300 megawatts (MW) is confirmed.
Mid- to long-term growth expectations also remain valid. As the government reviews measures to promote renewable energy direct power purchase agreements (PPA), expectations are growing for expansion of the related market. Within the industry, forecasts suggest that if part of the existing long-term contract volume under the Renewable Portfolio Standard (RPS) shifts to the PPA market, opportunities for solar power projects will increase, and SK Eternix could also benefit.
