[Click eStock] International Oil Prices Rise... "Expecting Strong Performance from GS"

[Asia Economy Reporter Ji Yeon-jin] KB Securities announced on the 15th that it is raising the target price for GS to 55,000 KRW due to the rise in international oil prices.

GS's Q4 sales and operating profit were 3.6529 trillion KRW and 279.7 billion KRW, respectively, down 15.5% and 41.7% year-on-year. GS Caltex's revenue decreased by 34.9% year-on-year to 5.6614 trillion KRW, and operating profit turned to a loss, recording a deficit of 51.2 billion KRW. Despite the increase in Q4 refining margins, this was due to a decrease in inventory-related gains and losses. Inventory-related gains in Q3 exceeded 200 billion KRW, but it is estimated to have decreased to around 70 billion KRW in Q4. GS EPS's sales and operating profit were 187.2 billion KRW and 4.7 billion KRW, down 9.9% and 65.9% year-on-year, respectively.

This year, GS's sales and operating profit are expected to increase by 9.4% and 81.8% year-on-year to 16.8971 trillion KRW and 1.6734 trillion KRW, respectively. This is due to the performance growth of GS Caltex and private power generation subsidiaries (GS EPS/GS E&R). GS Caltex's operating profit this year is expected to turn positive to 1.1781 trillion KRW compared to the previous year. Refining margin improvement is expected in the second half after vaccine inoculation in the first half. The refining margin is expected to rise from $3.8 per barrel in 2020 to $4.6 this year and $5.3 in 2022. Operating profit of private power generation subsidiaries in 2021 is also expected to increase by 20.7% from last year to 240.4 billion KRW.

Baek Young-chan, an analyst at KB Securities, said, "The rise in international oil prices since Q4 last year is expected to lead to a subsequent increase in SMP (System Marginal Price)," adding, "Due to the strong international oil prices, refining margin increases and SMP improvements are expected to improve the performance of the private power generation business."