Hana Financial Investment Report
[Asia Economy Reporter Lee Myunghwan] Amid the ongoing diesel supply shortage caused by the recent global surge in gas and coal prices, securities analysts have predicted that domestic refining companies will benefit.
On the 22nd, Hana Financial Investment analyzed, "(Domestic refining companies) will benefit from resource nationalism, decarbonization, and deglobalization," highlighting this perspective.
Hana Financial Investment diagnosed that the diesel supply shortage is worsening due to the strong global gas and coal prices. Among regions, the situation in the US and Europe is more severe than in Asia, where demand is sluggish due to China's lockdowns.
They also pointed out that for the diesel supply shortage to be resolved, the fundamental cause?the strength of gas and coal prices?must ease. If sanctions on Russia are not lifted, the strong prices of gas, coal, and petroleum products are inevitable.
They also noted that global resource nationalism is intensifying. From the export suspension of urea and fertilizers by China and Russia in the second half of last year to the recent export bans on palm oil by Indonesia and wheat by India, the weaponization of resources continues. Since diesel is used in industries and agriculture, it is closely related to livelihood issues, and resolving the energy crisis is a core task for governments worldwide. Therefore, the possibility of intensified resource nationalism in the petroleum products market is very high. Considering coal and power shortages in China and India, the possibility of future diesel export bans cannot be ruled out.
In this process, Hana Financial Investment analyzed that the attractiveness of domestic refining companies will be highlighted. Domestic refiners have a high kerosene and diesel ratio of 55%, directly benefiting from the diesel shortage. Domestic refining companies have a 50:50 ratio of exports to domestic sales, with an overwhelmingly higher export ratio compared to other countries. They are described as almost the only refiners that can benefit by diversifying export destinations amid the current global petroleum product shortage.
Yoon Jaesung, a researcher at Hana Financial Investment, presented S-Oil as the 'top pick' among domestic refiners, explaining, "Saudi Aramco is the largest shareholder, which lowers the risk of crude oil procurement, while the dividend yield is attractive at about 5%, combined with undervaluation appeal."
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