Hana Securities has raised its target price for S-Oil from 200,000 won to 220,000 won, citing the company's potential to achieve record operating profits this year. The investment recommendation remains a 'buy.'
In a report released on August 4, analyst Yoon Jae-sung stated, "This is still a conservative level compared to the peak price-to-book ratio (PBR) of 2.5 times during the previous boom in 2018."
Yoon identified three key factors contributing to the positive momentum for the second half of the year: an increase in lubricant oil profits, the continuation of negative official selling prices (OSP), and stabilization of oil prices. He explained, "The momentum for the second half is driven by three factors. First, the additional profit increase from lubricant oils. The Qatar Shell Pearl GTL Train 2 is expected to be fully operational by the end of the first quarter of 2027, making strong lubricant oil prices inevitable until then."
He also noted, "The confirmation of the negative OSP phase indicates that the OSP for September is expected to remain in negative territory, similar to August." Furthermore, he analyzed that stabilization of oil prices could serve as a good trigger for generating higher profits through the lifting of domestic price caps.
The forecast for third-quarter earnings has also been significantly raised. Yoon estimated that S-Oil's operating profit for the third quarter will reach 1.08 trillion won, an increase from the initial estimate of 490 billion won and 71% higher than the current consensus of 630 billion won.
Additionally, he projected that lubricant oil operating profits would improve significantly to 680 billion won, reflecting a 17% increase in the export price of lubricant oils in July compared to the previous month, along with a 29% rise in export margins.
* This article has been translated by AI.
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