[Click e-Stock] "S-Oil Secures Differentiated Crude Oil Procurement Defense... Target Price Raised"

Target Price Raised from 1 Million Won to 1.4 Million Won

On March 18, IBK Investment & Securities raised its target price for S-Oil from 1 million won to 1.4 million won, citing the company's solidified defense in differentiated crude oil procurement. The investment opinion was maintained as "Buy."

Lee Dongwook, a researcher at IBK Investment & Securities, stated, "The recent escalation of geopolitical risks in the Middle East is once again highlighting the vulnerability of regional petrochemical companies in sourcing raw materials. In contrast, S-Oil is securing differentiated crude oil procurement defense through the robust geopolitical infrastructure and supply chain backup of its largest shareholder, Saudi Aramco."

Saudi Aramco has recently increased the operational rate of its East-West pipeline, which links the eastern oil fields of Saudi Arabia with the Yanbu port on the Red Sea, to a record high of 7 million barrels per day in order to bypass export disruptions caused by potential blockades of the Strait of Hormuz. Lee noted, "Although the nominal shipping capacity of the Yanbu port is at the level of 4.5 million barrels per day (with an actual capacity of 4 million barrels), which is not sufficient to fully replace the 5.5 million barrels per day previously exported through the Strait of Hormuz, Aramco is highly likely to prioritize crude oil supply to its key subsidiary S-Oil, in which it holds a 63.4% stake." He further analyzed, "This illustrates the gap between the procurement risks faced by non-integrated pure chemical companies during geopolitical crises and the procurement stability enjoyed by direct subsidiaries of major oil-producing national companies equipped with large-scale refining facilities."

S-Oil's first-quarter results this year are expected to exceed market expectations. Lee said, "S-Oil's operating profit for the first quarter is forecast at 793.9 billion won, an 87% increase from the previous quarter, far surpassing the recently elevated market expectation of 406.4 billion won." He added, "Benefiting from a favorable exchange rate for exporters and a surge in inventory-related gains due to the rebound in average spot oil prices in March 2026 compared to December 2025, as well as the simultaneous increase of kerosene and diesel cracks and benzene and paraxylene (PX) spreads due to geopolitical issues, are additional factors driving earnings improvement."

The Shaheen Project is analyzed to have entered the phase just before commercialization. As of March 2026, the Shaheen Project recorded an overall EPC (Engineering, Procurement, Construction) progress rate of 95%, with design at 97.1%, procurement at 99.7%, and construction at 89.8%, proceeding as planned. Lee explained, "Most of the risks related to construction and procurement have already been addressed, and the key focus has now shifted to the successful mechanical completion in June 2026 and the stable execution of test runs and commercial operation in December 2026." He further assessed, "Currently, the budget is being rigorously managed within the approved scope, and with ongoing efforts for quality control, pre-commissioning, and customer acquisition, the project is evaluated to have entered the phase just before actual commercialization, beyond the simple construction stage."

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