[Click eStock] S-Oil to Achieve Record High Performance This Year... "Gaining Spotlight as an Inflation Hedge Tool"

[Asia Economy Reporter Park Jihwan] Hana Financial Investment on the 7th expressed the opinion that S-Oil is expected to achieve record-high performance this year and is anticipated to be an effective stock as an inflation hedge tool.

Yoon Jaesung, a researcher at Hana Financial Investment, said, "We forecast a supply shortage of petroleum products and strong refining margins in the first half of this year," adding, "First, global inventories are absolutely insufficient. In fact, petroleum product inventories in the US, Europe, and Asia have fallen to the lowest levels in six years."

On the other hand, additional supply capacity is lacking due to the paradox of decarbonization. The scale of US refining facilities, which account for 20% of the global market share (M/S), has decreased by 5% compared to the end of 2020, and the operating rate is already approaching 90%. It is analyzed that export capacity will continue to decline in the future due to the absence of expansion.

Researcher Yoon emphasized, "China has also started regulating refining facilities, including small-scale Teapots, since last year by emphasizing Net Zero. The total facility scale has been limited to less than 20 million b/d. The operating rate of state-owned enterprises exceeds 80%, already achieving government targets."

He also noted that the strength of European natural gas prices due to Russia's gas export suspension and the strength of coal prices due to Indonesia's coal export suspension inevitably stimulate demand for petroleum products (diesel, B-C oil) used for alternative power generation.

S-Oil is expected to achieve record-high performance this year. It is evaluated as a valid inflation hedge play. Due to strong oil prices and refining margins, operating profit is expected to reach 2.6 trillion KRW this year, following 2.3 trillion KRW last year, marking the highest ever.

Researcher Yoon said, "With a price-earnings ratio (PER) of 5.6 times and a price-to-book ratio (PBR) of 1.2 times, it is absolutely undervalued," emphasizing, "Considering the petroleum product supply shortage in 2022 and the resulting inflation and interest rate hike pressures, it is a company that must be held as a hedge."

This content was produced with the assistance of AI translation services.