Hanwha Investment & Securities said on the 17th that for S-Oil, it expects first-quarter results to beat market expectations on rising international oil prices and solid refining margins, but it projected short-term crude supply and demand will be the biggest hurdle.
It maintained a "Buy" investment rating and raised the target price to 150,000 won from 130,000 won. The previous trading day's closing price of S-Oil was 118,100 won.
Hanwha Investment & Securities projected S-Oil's first-quarter revenue at 9.4 trillion won and operating profit at 1.1 trillion won. Revenue rose 4.7% from a year earlier, and operating profit swung to a surplus.
It expected operating profit in the refining division to be 1 trillion won, up 737 billion won from the previous quarter. That reflects 598.5 billion won in inventory valuation gains from rising oil prices and improved refining margins. In the first quarter, the complex refining margin was $19 per barrel, up $4.60 per barrel from the previous quarter.
In chemicals, it expected a swing to a surplus based on solid paraxylene (PX) and benzene (BZ) spreads in January–February and the profitability secured by the plant shutdown in March. In base oils, although product spread volatility intensified due to the war, it estimated the quarterly average decline was only slight.
Meanwhile, domestic refiners face heightened short-term uncertainty due to unstable crude supply and demand and the implementation of a domestic price cap.
Analyst Lee Yong-wook at Hanwha Investment & Securities said, "If the conflict is prolonged, there is a possibility of lower utilization rates from late May, but S-Oil has secured stability in crude procurement as its parent is Saudi Arabia's Aramco," adding, "Government price-suppression measures amid a surge in oil prices are causing opportunity losses related to gasoline sales, but those losses can be recovered when oil prices stabilize going forward."
However, it noted that although Saudi Arabia is diverting about 3 million barrels of its existing exports through the Strait of Hormuz (an average of about 5.5 million barrels per day) to the Red Sea, uncertainties on the Red Sea route—such as longer transit times and risks related to Houthi rebels—remain a risk factor.
The analyst said, "Even before the war, the global refining market in 2026–2028 was set to enter a tight supply-demand cycle in which demand exceeds supply," adding, "Even after the war ends, considering strong diesel demand for reconstruction and the lag in normalizing facilities, the high-margin trend is expected to continue."
He added, "With solid margins offsetting the current increase in logistics costs, we believe share price re-rating will accelerate once short-term supply-demand uncertainties are resolved."