[Click eStock] S-Oil, Refining Industry Investment Appeal ↓... Target Price Downgraded

[Asia Economy Reporter Yoonju Hwang] Meritz Securities maintained a 'Buy' rating on S-Oil on the 18th but lowered the target price to 100,000 KRW, stating that considering the uncertainty in oil prices, the investment attractiveness of the refining sector is not high.

Researcher Noh Woo-ho of Meritz Securities stated, "Current oil prices show backwardation, where spot prices are higher than futures due to concerns over crude oil supply disruptions, and this is a period of increased price volatility."

Researcher Noh explained, "The oil price surge triggered by Greenflation in 2021 peaked with geopolitical risk concerns at the beginning of 2022," adding, "This is an oil price increase not accompanied by demand."

He analyzed, "If the oil price surge prolongs, it negatively affects profitability due to cost burdens, but if oil prices stabilize downward, it is somewhat positive for profitability."

He continued, "We maintain the forecast for WTI crude oil at $80 per barrel and refining margin at $7.7 as of the end of 2022," adding, "With improved refining margins at the beginning of the year and increased oil price volatility, we expect earnings to show a pattern of rising first and then falling."

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