[Click e-Stock] "S-Oil Expected to Deliver 'Low in the First Half, High in the Second Half' Performance Amid Strong Refining Margins"

Maintaining Buy Investment Rating

On October 2, Shinhan Investment Corp. maintained its "Buy" rating and target price of 80,000 won for S-Oil, stating that "the strong refining margin is expected to continue, resulting in a clear 'low in the first half, high in the second half' performance trend."

According to the report, S-Oil's third-quarter operating profit is expected to turn positive, reaching 250.5 billion won, in line with the market consensus of 258.8 billion won. The refining segment's operating profit is projected to return to the black at 110.3 billion won, driven by the disappearance of one-off losses from the previous quarter and a rebound in oil prices. Inventory valuation gains of 53.4 billion won, resulting from the rise in international oil prices at the end of the quarter, are also expected to contribute to improved performance.

While complex refining margins remain solid, the additional decline in Official Selling Price (OSP) is expected to further improve margins. The report explained, "Due to supply shortages such as production disruptions in Russia, overseas regular maintenance, and plant closures, margins are being firmly maintained at around $7.70 per barrel. With diesel and kerosene accounting for 36% of production, strong export competitiveness is expected to drive further earnings growth."

In the chemical segment, despite weak olefin market conditions, the paraxylene (PX) spread has risen by 14%, which is expected to reduce losses. The lubricants segment is also expected to deliver solid results, with operating profit increasing by 8% quarter-on-quarter to 142.2 billion won.

Shinhan Investment Corp. stated, "Despite the low oil price trend due to OPEC+ production increases, global supply remains tight, and the strong refining margin is expected to continue, keeping fundamentals robust through the end of the year. With the 12-month forward price-to-book ratio (PBR) at 0.8 times, the stock remains undervalued relative to fundamentals, so the decoupling phenomenon is likely to gradually resolve."

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