[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities evaluated on the 29th that S-Oil's operating profit in the third quarter of this year fell short of market expectations but significantly reduced the deficit compared to the previous quarter.
S-Oil recorded an operating loss of 9.3 billion KRW in the third quarter of this year. Although opportunity costs occurred due to regular maintenance and typhoon events, olefins and lubricants maintained solid profit margins, and there was an improvement in demand for some petroleum products compared to the previous quarter, according to the analysis.
In the fourth quarter, operating profit is expected to turn to a surplus of 90.1 billion KRW compared to the previous quarter.
Researcher Lee Dong-wook of Kiwoom Securities explained, "A significant improvement in the refining sector's performance is expected to be limited, but some seasonal effects are anticipated, and the petrochemical and lubricant sectors are expected to recover due to government maintenance of regional competitive facilities and the operation of forward expansion facilities."
Lee forecasted, "Despite maintaining a deficit trend until the third quarter this year, the refining sector is expected to recover performance due to the easing of COVID-19 related restrictions in various countries, and PX and lubricants are expected to see a reduction in oversupply and an improvement in spreads starting next year." Accordingly, he mentioned maintaining a 'Buy' investment opinion and a target price of 91,000 KRW for S-Oil.
Lee added, "If COVID-19 easing movements occur next year, it is necessary to consider that S-Oil may have the largest rebound in performance and stock price among refining stocks. The delay in the full-scale investment timing of S-Oil's second-phase petrochemical project, which limits large-scale investments in the short term, is also expected to positively affect next year's performance."
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