[Click eStock] S-OIL, Record-Breaking Earnings Forecast VS. Oil Price Decline Concerns

[Asia Economy Reporter Hwang Junho] Shinhan Financial Investment maintained its target price at 150,000 KRW on the 8th, stating that S-OIL is expected to record its highest-ever performance this year.

Shinhan Financial Investment forecasted that S-OIL's operating profit for the second quarter of this year will exceed market expectations at 1.55 trillion KRW. Despite a decrease in inventory valuation gains, strong refining margins are expected to drive solid results. Refining operating profit is expected to reach 1.24 trillion KRW.

Chemical operating profit is projected to turn positive at 67.9 billion KRW. Despite weakness in the olefin spread, a sharp rise in the aromatic (PX, benzene, etc.) spread is expected to result in robust performance. Lubricant base oil is estimated to record an operating profit of 237.9 billion KRW (22%) as the spread rises 11% due to tight base oil supply.

Accordingly, the operating profit for this year is expected to reach a record high of 5.1 trillion KRW. Among this, refining operating profit is forecasted to increase by 352% year-on-year to 4.1 trillion KRW.

Jinmyung Lee, Senior Researcher at Shinhan Financial Investment, stated, "Although concerns about demand decline due to the recent global economic slowdown caused WTI crude oil prices to fall below 100 dollars, the supply issues that caused high oil prices are unlikely to be resolved in the short term, and steady demand continues, so the adjustment range of refining margins is limited," adding, "As record-high performance is expected, the attractiveness of high dividends is also expected to gradually emerge."