Foreigners Bought 359.1 Billion KRW Since Early Year Until Yesterday
S-Oil Stock Price Rose 31.5%
RUC/ODC Impact...Operating Rate Up, Loss-Making Products Down
"No Crude Oil Transport Risk, Undervalued Refinery Stocks"
[Asia Economy Reporter Hwang Yoon-joo] Amid a volatile stock market, refining stocks are gaining attention, with foreign investors' 'love calls' for S-Oil standing out.
According to the Korea Exchange on the 18th, since the beginning of the year (January 3) until the day before, the refining stock with the largest net foreign purchase was S-Oil (359.1 billion KRW). GS, the parent company of GS Caltex, had net purchases of 42.7 billion KRW, and SK Innovation had 8.1 billion KRW. This amount is 8 times that of GS and 44 times that of SK Innovation.
The overwhelming net buying by foreigners was also reflected in the stock price increase. During the same period, S-Oil rose 31.5% from 85,900 KRW to 113,000 KRW. GS increased 19.2% from 39,400 KRW to 47,000 KRW. In contrast, SK Innovation fell 16.1% from 248,000 KRW to 208,000 KRW. This contrasts sharply with the KOSPI index, which dropped 12.3% from 2,988.77 to 2,620.44 during this period.
The prominent 'buy' trend for S-Oil is due to the sharp rise in international oil prices since the beginning of the year and the continued outlook for rising oil prices amid the Russia-Ukraine war. As energy prices soar, S-Oil, which is focused on refining, has attracted attention.
Dubai crude oil surged 44.2% from $76.88 per barrel at the beginning of the year to $110.88 the day before. The international oil price was on the rise due to supply-demand mismatches, and the Russia-Ukraine war accelerated this trend.
The refining margin, which gauges the profitability of refiners, also soared dramatically. It peaked at $24.2 last week from around $6 in the first week of January. The breakeven point for refining margins is generally known to be $4 to $5.
Yoon Jae-sung, a researcher at Hana Financial Investment, analyzed, "Unless gas prices fall, coal, crude oil, and petroleum products are all interlinked, so the strength of all energy sources is likely to continue for the time being. S-Oil is undervalued with Saudi Aramco as the largest shareholder, which reduces crude oil procurement risk, and its dividend yield is around 5%, making it attractive for dividends."
Unlike SK Innovation, which is focusing on the battery business through its subsidiary 'SK On,' and GS Caltex, which is investing heavily in new gas station businesses, S-Oil is concentrating on refining and chemical businesses. In particular, the operation of the complex chemical facility (RUC/ODC) project, which converts loss-making products (heavy oil) into high value-added products (gasoline), has also stimulated investment sentiment.
An industry insider explained, "Typically, refiners operate facilities flexibly depending on market conditions, but S-Oil is maintaining a 100% operating rate," adding, "With full operation and production of high value-added products, its operating profit margin is much higher than other refiners."
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