Eugene Securities predicted on the 5th that S-Oil could generate operating profits of up to 2 trillion won annually if the Shahin project is launched as scheduled in 2027.
Hwang Seong-hyun, a researcher at Eugene Securities, estimated that the internal rate of return (IRR) would be 18% based on assumptions of a borrowing rate of 4%, annual depreciation costs of 310 billion won, an operating rate of over 80% after 2027, and the full external sale of products based on profitability.
The researcher noted, "If the Shahin project facility operates at full capacity, the estimates may vary depending on market conditions, but reflecting the current business climate, it is expected that operating profit could approach up to 2 trillion won."
S-Oil's Shahin project is a venture to build a petrochemical complex in Ulsan, with a total investment of 9.3 trillion won. The current progress rate is about 77%. Once the Shahin project is completed, its ethylene production capacity is expected to account for 13% of domestic facilities, reaching 1.8 million tons per year.
Given the characteristics of the new facility, the researcher projected that the energy efficiency of the Shahin project would be more than 10% better than that of leading global corporations. He stated, "In terms of earnings before interest, taxes, depreciation, and amortization (EBITDA), the ethylene spread (the price of ethylene minus the price of the raw material, naphtha) is expected to reach breakeven even at $100 per ton."
Despite concerns about the profitability of the Shahin project amid a prolonged recession in the petrochemical industry, the researcher anticipates that it will be able to achieve high profit margins.
The researcher noted, "The current chemical market is at its lowest point, and aging chemical facilities, particularly in China and Europe, are expected to undergo restructuring," adding that "Even considering a strong price for heavy oil, which will be used as raw materials, S-Oil is unlikely to have difficulties achieving its target IRR."