[Click eStock] "S-Oil, Expectations for Improved Business Conditions Next Year UP"

[Asia Economy Reporter Ji-hwan Park] Meritz Securities maintained a 'Buy' rating and a target price of 80,000 KRW for S-Oil on the 26th, citing rising expectations for industry improvement next year.

On the day, Noh Woo-ho, a researcher at Meritz Securities, explained, "The refining industry is considered one of the sectors most affected by the novel coronavirus disease (COVID-19)," adding, "This is due to inventory losses from the sharp drop in oil prices in the first half of this year and the deterioration of refining margins caused by weak transportation demand symbolized by Jet fuel in the second half."

At this point, with the increasing probability of success for COVID-19 vaccines and treatments, there is an analysis that a response strategy for post-COVID-19 beneficiary industries is necessary. In particular, the refining industry is expected to benefit from the normalization of the economy, with a net increase in global crude oil demand of 5.89 million barrels per day next year.

Researcher Noh said, "West Texas Intermediate (WTI), which had been stagnant, has also settled above $42 per barrel, raising expectations for a turnaround," adding, "the profit flow is also positive."

This year, S-Oil's fourth-quarter operating profit is expected to turn positive to 150.4 billion KRW compared to the previous quarter. The annual operating profit for next year is projected to turn positive at 1.2 trillion KRW, forecasting profitability improvement led by the refining industry.

He evaluated, "The recovery of petrochemical operating rates due to front-end demand recovery and the positive effects of lower input costs contribute to relatively stable profit resilience compared to competitors."

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