[Click eStock] "S-Oil, Boom Phase Expected to Continue Next Year"

Yuanta Securities Report

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating and a target price of 130,000 KRW for S-Oil on the 8th. This is based on the expectation of earnings growth considering the tight global refining capacity situation.

The Singapore refining margin, which reflects the refining industry conditions, is around 7 dollars per barrel. After soaring from 7.1 dollars in the second half of last year to 21 dollars in the second quarter of this year, it is expected to maintain the 7-dollar range from the second half onward. Considering the average industry level is 6 dollars, the boom phase is expected to continue.

The global refining industry is likely to maintain a boom period next year as well. This is because the expected global daily demand is projected to increase by 1.8 to 2 million barrels. Demand from GDP growth is expected to add 800,000 barrels, an additional 300,000 barrels from the easing of lockdowns in Chinese cities, and 800,000 to 1 million barrels from the recovery of international aviation fuel demand. On the other hand, the net increase in refining capacity is small. It is expected to be around 1.7 million barrels, so the supply-demand situation is predicted to be similar to the beginning of this year.

Next year's expected sales are 37 trillion KRW, operating profit 1.8 trillion KRW, and net profit 1.5 trillion KRW. Although operating profit is lower than this year's record high of 4.7 trillion KRW, it exceeds the 1.6 trillion KRW recorded during past boom periods.

Hwang Kyuwon, a researcher at Yuanta Securities, said, “Since earnings are expected to remain at boom levels next year, a strategy of buying below 100,000 KRW is valid,” adding, “Following an interim dividend of 2,500 KRW, a year-end dividend of 8,250 KRW per share can be expected, resulting in a dividend yield of 8%.”

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