S-Oil(010950) is up nearly 8% early in the session on strong refining margins and expectations for improved results in the second half.
As of 9:34 a.m. on the 28th, S-Oil was trading at 147,600 won on the Korea Exchange, up 10,900 won (7.97%) from the previous session.
With tight supplies of refined products from the Middle East and Russia keeping refining margins high, and a drop in the official selling price (OSP) for Saudi crude added on top, analysts said expectations for better results are driving the move.
Hwang Gyu-won of Yuanta Securities Korea raised S-Oil's target price to 205,000 won from 175,000 won and maintained a "buy" rating. He projected operating profit this year at 5.2 trillion won, with 3 trillion won of that in the second half.
Hwang said, "S-Oil's complex refining margin in the second to third quarters is above $41 per barrel, higher than U.S. refiner Valero's $39," adding, "When the OSP falls by $1 per barrel, annual operating profit can increase by about 300 billion won."
Shinhan Investment & Securities also raised S-Oil's target price by 11% to 200,000 won. Lee Jin-myeong of Shinhan Investment & Securities said oil prices and refining margins could see a short-term correction after the easing of the war, but with time needed to repair refining facilities and rebuild product inventories, high refining margins are likely to continue.
Lee said, "S-Oil can simultaneously benefit from Aramco-affiliated stable crude procurement competitiveness and the decline in Saudi OSP, making the upside the most direct," adding, "The Shaheen project is set to begin commercial operation in early 2027, and as investment burdens ease, earnings power and the capacity to expand shareholder returns will be strengthened."