[Click eStock] "S-Oil, Stock Undervalued... Earnings Momentum Expected to Continue"

On the 22nd, Korea Investment & Securities maintained a 'Buy' rating and a target price of 110,000 KRW for S-Oil, stating that the profit momentum in the first quarter is expected to steadily continue into the second quarter.

Researcher Choi Go-woon said, "The operating profit for the first quarter is expected to be 623 billion KRW, exceeding the consensus (average estimate) by 30%," adding, "Refining margins are rising and inventory lagging effects are improving refining performance, while the lubricants base oil segment is expected to maintain an operating profit margin of over 20%."

He also noted, "The official selling price (OSP) of crude oil fell to $1.7 in April based on Arab Light, about half the average of last year," and added, "Since the second half of 2022, volatility increased due to alternating quarterly profits and losses, which was a discount factor, but this year’s profit momentum is expected to steadily continue into the second quarter."

In particular, he analyzed that the recent stock price has been undervalued. He said, "Although it has rebounded about 20% from the low at the beginning of the year, the 2024F price-to-book ratio (PBR) still remains below 1," and added, "It remains at a historically low level lower than just after the pandemic."

He continued, "Last year was a period when investment sentiment was weakened due to the base burden from the Russia war, the peak-out of refining margins, and a worse-than-expected consumption environment," and added, "This year, oil prices started in the $70 range, highlighting a turnaround compared to refining losses in the last quarter. Attention should be paid to the relative investment attractiveness compared to the chemical industry, which is experiencing a prolonged recession."