Meritz Securities has projected an increase in operating profit for SK Innovation, driven by rising international oil prices and strong refining margins. The target price has been raised from 180,000 won to 210,000 won.
In a report released on October 14, analyst Noh Woo-ho estimated that SK Innovation's third-quarter revenue would reach 29.8 trillion won, with an operating profit of 3.7 trillion won. He noted that the non-battery business segment is benefiting from geopolitical risks, which is driving up overall profit expectations.
By segment, the refining division is expected to achieve an operating profit of 1.9 trillion won, bolstered by strong international oil prices and refining margins. The lubricants segment is projected to generate 1.1 trillion won in profit due to improved spreads from supply disruptions, while the E&S division is anticipated to earn 688.3 billion won, benefiting from direct imports of liquefied natural gas (LNG) and sustained strength in the system marginal price (SMP).
Noh believes that geopolitical uncertainties are unlikely to be resolved in the short term, suggesting that energy prices are likely to remain high. He explained that prolonged geopolitical risks in Europe and the Middle East are affecting the entire energy value chain, from oil and gas production to refining and maritime transport, leading to widespread supply shortages.
He stated, "The strength in upstream oil and gas has already transferred to the refining sector and is spreading to midstream operations, such as very large crude carriers (VLCCs). Ultimately, the burden of price increases due to supply shortages will inevitably be passed on to buyers."
International oil price forecasts are also being revised upward. According to an energy survey conducted by the Dallas Federal Reserve, the forecast for international oil prices at the end of this year has been raised from $81 per barrel to $88. This marks the third consecutive quarter of upward revisions, indicating that the normalization of oil product supply is expected to take longer than previously anticipated.
Noh concluded, "The robust profit capacity of the oil, lubricants, and power generation sectors is being maintained, and a hedging strategy utilizing refiners like SK Innovation will be effective in the structural energy inflation phase expected in 2026-2027."
* This article has been translated by AI.
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