iM Securities announced on July 14 that it has raised its target price for S-Oil from 135,000 won to 170,000 won, reflecting strong diesel margins, cost improvements, and expectations for increased dividend payouts. The firm maintained its 'buy' rating.
Analyst Jeon Yu-jin stated, "We expect a boost in dividends following the strong performance in refining margins and investments in the Shahin project. This could mark a return to the glory days of dividend payouts, which ranged from 35% to 60% between 2016 and 2018."
He added, "In the second half of the year, tight finished product inventories and reduced supply from Russia are likely to sustain strong diesel margins. The decline in official selling prices (OSP) will also positively impact cost conditions."
Jeon noted that the second-quarter operating profit is projected to reach 928.3 billion won, aligning with market consensus. He highlighted that the lubricants sector is expected to achieve an operating profit of 466.3 billion won due to rising base oil prices and the lagging effect of vacuum gas oil (VGO), setting new records for both revenue and operating profit.
Looking ahead, he cautioned that while operating profit may decline in the second half due to oil price stabilization, strong diesel margins are expected to continue until the end of the year due to shortages in diesel inventories in the U.S. and Europe, along with restrictions on Russian diesel exports. He also predicted that Saudi Arabia's reduction in Asia's OSP will benefit S-Oil, a subsidiary of Aramco.
* This article has been translated by AI.
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