[Click eStock] "GS, Q2 Operating Profit Below Expectations"

DB Financial Investment forecasted on the 23rd that GS's operating profit for the second quarter will fall short of market consensus. The investment opinion 'Buy' and the target price of 62,000 KRW were maintained.

Seungjae Han, a researcher at DB Financial Investment, stated, "We expect the second quarter operating profit to decrease by 23% quarter-on-quarter to 787 billion KRW, falling short of the market consensus of 837.6 billion KRW."

Han added, "Although the average quarterly oil price rose, the oil price in June slightly declined compared to March, reflecting a lagging effect, and with refining margins also falling, GS Caltex's refining segment is expected to post a loss of 16.2 billion KRW (QoQ -317.2 billion KRW), resulting in poor performance. However, supported by a chemical rebound and solid lubricants base oil, GS Caltex's overall operating profit is estimated at 147.5 billion KRW."

It is expected that GS Caltex's short-term earnings rebound will not be easy. Although a peak season effect was anticipated in the refining sector during the summer, the refining margin recovery has been slow due to a larger-than-expected slowdown in China's oil demand.

Han explained, "Despite the expansion of export quotas, China's refining throughput has shown negative growth from April to June, suggesting that domestic demand is not rebounding easily. Unless a sharp turnaround occurs in the second half, it is highly likely that the year-end will coincide with the off-season and weak oil prices due to OPEC production increases."

Nevertheless, the power generation subsidiary is maintaining solid performance despite the downward stabilization of the System Marginal Price (SMP), highlighting the relative earnings stability of GS Caltex.