[Click eStock] "GS, GS Caltex Performance Expected to Improve This Year"

[Asia Economy Reporter Eunmo Koo] KB Securities maintained its investment opinion and target price for GS at "Buy" and 65,000 KRW, respectively, citing expected profit growth of its private power generation subsidiaries through capacity expansion and cost reduction, as well as anticipated enhancement of shareholder value through continuous dividend increases.

On the 3rd, KB Securities analyst Youngchan Baek estimated in a report that GS's sales this year will increase by 4.4% from last year to 18.7117 trillion KRW, and operating profit will rise by 11.4% to 2.2466 trillion KRW. Analyst Baek stated, "The reason for the profit increase is expected improvement in GS Caltex's performance," and forecasted, "GS Caltex's operating profit this year will be 1.2528 trillion KRW, a 28.6% increase compared to last year."

The refining margin, which declined in the fourth quarter of last year, is expected to rise again from the first half of this year. Analyst Baek explained, "The reason for expecting an increase in refining margins is due to the implementation of IMO 2020, which is anticipated to increase diesel demand; this year's new refining capacity expansion is estimated at 890,000 B/D, which is smaller than the increase in crude oil demand; and China's policy to strengthen petroleum product quality is expected to reduce outdated facilities."

In the fourth quarter of last year, sales increased by 14.9% year-on-year to 4.4786 trillion KRW, and operating profit rose by 17.8% to 465 billion KRW, which is expected to fall short of the market consensus of 550.1 billion KRW based on operating profit. GS Caltex's operating profit in the fourth quarter is expected to turn positive year-on-year to 189.4 billion KRW but decrease by 41.2% compared to the third quarter.

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