[Click eStock] "S-Oil, Record High Q2 Earnings... Target Price Up"

[Asia Economy Reporter Hwang Yoon-joo] Hana Financial Investment forecasted on the 13th that S-Oil will record its highest-ever performance in the second quarter. Accordingly, it maintained a 'Buy' investment rating and raised the target stock price to 160,000 KRW.

Yoon Jae-sung, a researcher at Hana Financial Investment, stated, "Operating profit for the second quarter is expected to be 1.4 trillion KRW, an increase of 148% year-on-year and 6% quarter-on-quarter." This figure exceeds Hana Financial Investment's consensus by 77%. The refining segment's operating profit is expected to be 1.1 trillion KRW, similar to the previous quarter.

Researcher Yoon anticipated improvements in profits across all S-Oil business divisions. He explained, "Despite the removal of 450 billion KRW in inventory-related profits from the previous quarter, the real refining margin improved by more than 5 dollars per barrel compared to the previous quarter, considering the rise in OSP (Official Selling Price of crude oil)."

[Image source=Yonhap News]

Researcher Yoon also expected strong performance in the third quarter due to improvements in lubricants/base oil and petrochemical spreads. He assessed that the negative impact related to the Ulsan alkylation process explosion accident would not be significant.

He said, "Operating profit for the third quarter is estimated at 1.18 trillion KRW based on a conservative assumption that adjustments will occur despite the recent ultra-strong refining margins," adding, "We are significantly raising the annual estimates." This is also the reason why Researcher Yoon raised the target stock price.

He identified June and July as the most critical periods in terms of market conditions and performance. He analyzed, "Due to the lifting of China's lockdown, net exports of petroleum products in May sharply declined by 46% compared to the previous month, and considering the second export quota announced last week, the cumulative export quota has shrunk by 41% year-on-year, making it difficult for China's net exports to increase significantly in the second half."

He also pointed out, "This year, the US is expected to have an above-average hurricane season, making it highly likely that the current tight supply and demand will continue. Additionally, the normal operation status of European refining facilities related to the EU's crude oil embargo announcement at the end of May is another point to watch."

He added, "The only risk at this point is demand destruction due to high product prices."

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