DB Securities announced on August 20 that it has raised its target price for GS from 120,000 won to 150,000 won, a 25% increase, citing strong performance in the refining and lubricants sectors and expectations for new business investments fueled by substantial cash flow. The investment recommendation remains a 'buy.'
Han Seung-jae, a researcher at DB Securities, stated, "As the refining and lubricants market continues to strengthen, GS Caltex's profit capacity is significantly improving. As the AIDC (Artificial Intelligence Data Center) project, which is being pursued based on massive cash flow, becomes more concrete, the potential for growth expectations and corporate value reassessment will increase."
In the second quarter, GS reported an operating profit of 1.7 trillion won, far exceeding the market consensus of 1.1 trillion won. The core subsidiary, GS Caltex, achieved record-high operating profit of 2.55 trillion won and net profit of 1.86 trillion won. The refining segment's operating profit reached 2.2 trillion won due to improved refining margins, while the lubricants segment also set a record with an operating profit of 357.7 billion won.
Looking ahead to the third quarter, the strong refining market is expected to support performance. Although an inventory valuation loss of about 1 trillion won is anticipated due to falling international oil prices, GS Caltex's operating profit is estimated to be 1.38 trillion won, bolstered by strong refining margins and favorable lubricants market conditions.
Han noted, "To resolve the supply shortage in refining, normalization of the Strait of Hormuz, comprehensive export permits from China, and the realization of domestic prices are necessary, but the likelihood of this happening in the short term is low. However, entering the peak season and a rebound in the standard market price (SMP) will also improve performance in the power generation sector."
* This article has been translated by AI.
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