[Click eStock] S-Oil, Clear Profit Improvement Trend in Second Half
Daishin Securities announced on the 31st that it maintains a Buy rating and a target price of 105,000 KRW for S-Oil. Researcher Wi Jeong-won stated, "We judge the market cycle in the refining sector to be similar to the improvement cycle from 2021 to 2022," and recommended, "Approach from a trading perspective based on clear profit momentum in the second half."
The refining sector recorded a deficit of 292.1 billion KRW in the second quarter, falling short of market expectations. The estimated refining margin for the second quarter was $0.15 per barrel, down 98.1% compared to the previous quarter. Additionally, the deficit widened due to scheduled maintenance (-117 billion KRW) and inventory valuation losses (-77 billion KRW). Operating profit in the chemical sector increased by 179.9% quarter-on-quarter to 82 billion KRW. The average P-X spread in the second quarter was $368.4, up 17.4% from the previous quarter, driven by increased xylene blending demand due to strong gasoline margins.
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Operating profit for the third quarter is expected to increase by 1,872% compared to the previous quarter. The refining sector is projected to improve by 660 billion KRW to 371.3 billion KRW quarter-on-quarter. The expected refining margin for the third quarter is $8.25 per barrel, an increase of $8 from the previous quarter. Since July, kerosene and diesel margins have exceeded $20 per barrel, maintaining a strong 110.8% increase compared to the previous quarter, while gasoline margins are beginning to improve mainly in the U.S. Due to the driving season effect in the U.S., wholesale gasoline prices have risen by more than 10%, driving global gasoline margins. Researcher Wi emphasized, "Assuming an average Dubai crude price of $82.8 in the third quarter (Saudi OSP at $3 per barrel), inventory-related profits of about 70 billion KRW are expected, indicating room for upward revision of earnings estimates."
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