Yuanta Securities has lowered its target price for S-Oil from 90,000 won to 80,000 won. This reflects the deterioration of earnings momentum due to this year’s decline in oil prices. The report also notes that, despite recent geopolitical tensions between Iran and Israel, downward pressure on oil prices may intensify in the third quarter.
On June 17, Yuanta Securities analyst Hwang Kyuwon stated in the report titled "S-Oil - Must Overcome the 2025 Earnings Hurdle," that “Earnings momentum in 2025 will be weak due to falling oil prices.” He explained, “While solid refining margins are expected thanks to a slowdown in global net additions of new refining capacity, international oil price declines (from $80 in 2024 to $66 in 2025) are acting as a drag.” He added, “In particular, we expect to see a bottoming of earnings in the second and third quarters of 2025.”
S-Oil’s second-quarter results are estimated to include sales of 7.9 trillion won, operating losses of 295.5 billion won, and a net loss attributable to controlling shareholders of 63.1 billion won. The operating loss is expected to widen significantly compared to the previous quarter (21.5 billion won). Hwang noted, “The underperformance of the refining division will be particularly pronounced,” and explained, “Although refining margins are expected to rise by $0.9 in the second quarter, Dubai international oil prices are projected to fall by $10, and inventory losses of about 280 billion won are anticipated.” In addition, the dollar-won exchange rate is expected to decrease from 1,452 won in the first quarter to 1,400 won in the second quarter, resulting in an estimated operating loss of about 100 billion won.
On an annual basis, S-Oil’s sales and operating profit are projected to reach 31.5 trillion won and 3.3 billion won, respectively, with an operating margin of 0.0%. Operating profit has been declining for three consecutive years, from a peak of 3.4 trillion won in 2022 (due to the Ukraine war), to 1.4 trillion won in 2023, and 422.2 billion won in 2024. Hwang explained, “Reflecting the earnings weakness caused by falling oil prices, we are lowering our fair value estimate to 80,000 won (from the previous 90,000 won).”
Hwang also pointed out that, despite the ongoing geopolitical dispute between Israel and Iran since June 13, downward pressure on oil prices in the third quarter may intensify due to oversupply. He said, “This is because of OPEC+,” and explained, “Although there was a plan to increase production by 2.2 million barrels per day for 18 months starting in April, the timing of the increase is accelerating. After a 400,000 barrel per day increase in the second quarter, there is a high possibility of an additional 790,000 to 1.2 million barrel per day increase in the third quarter. The company must overcome this hurdle.”
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