1. SNT Motive’s Q2 Performance: What Happened?

SNT Motive reported Q2 revenue of KRW 257.5 billion (+2%) and operating profit of KRW 26.6 billion (+2%), both surpassing market expectations. However, net profit came in at KRW 14.2 billion, a significant -41% drop compared to the estimated KRW 23.9 billion. Compared to Q1, revenue and operating profit increased, but net profit experienced a sharp decline.

2. Why the Sharp Decline in Net Profit?

While the exact reasons for the net profit decline remain unclear, several possibilities can be inferred from the preliminary results.

  • Increased SG&A Expenses: The decrease in net profit despite increased operating profit suggests a potential surge in selling, general, and administrative expenses.
  • Higher Financial Costs: The rising KRW/USD and KRW/EUR exchange rates, coupled with rising US interest rates, could have contributed to increased financial costs.
  • One-off Expenses: Potential expenses related to the lawsuit with EOS System cannot be ruled out.

3. External Factors at Play

External factors likely played a role in SNT Motive’s performance. Rising international oil prices, appreciating KRW/USD and KRW/EUR exchange rates, and increasing interest rates in both the US and Korea could have negatively impacted profitability through higher raw material costs, reduced export competitiveness, and dampened investment sentiment.

4. What Should Investors Do?

The decline in net profit could put downward pressure on the stock price in the short term. However, the growth of the eco-friendly vehicle parts business remains a positive factor. Investors should carefully consider the final earnings release and the company’s response strategy before making investment decisions. Pay close attention to SNT Motive’s cost management and foreign exchange risk management strategies.