Hanwha Investment & Securities raises the target stock price of S-Oil to 150k won... Looking forward to first-quarter performance

Hanwha Investment & Securities raised its forecast for S-Oil’s first-quarter performance on April 17, and increased its target stock price from 130,000 won to 150,000 won. This reflects its view that, amid a trend of rising international oil prices, the refining margin—reflecting the profitability of refineries—has remained healthy, and S-Oil is expected to deliver results that exceed the market’s average expectations.

Hanwha Investment & Securities analyst Li Yongxu expects S-Oil’s operating profit for the first quarter to reach 1.1 trillion won. Of this, the operating profit expected for the refining segment is 962 billion won. The key underlying factors are inventory valuation gains of 598.5 billion won driven by higher oil prices, as well as an improvement in the refining margin. Inventory valuation gains refer to the accounting profit generated when a refinery purchases crude oil and products at relatively lower prices, and their value increases as oil prices rise, resulting in higher profit in accounting terms. Refining margin refers to the profit space obtained when purchased crude oil is processed into petroleum products such as gasoline and diesel and sold; an improvement in this figure indicates stronger profitability of core operations.

Securities firms are also paying attention to recent external variables surrounding the refining industry. This is because the supply and demand for crude oil has continued to remain unstable, and short-term uncertainty has increased due to domestic price suppression policies and an upper limit on domestic sales prices implemented to ease consumers’ price burden. In this environment, there may be opportunity losses where expected gains from gasoline sales cannot be fully realized. However, Hanwha Investment & Securities has noted that S-Oil’s parent company is Saudi Aramco. Owing to its structure linked to major oil producers, it is considered relatively advantageous in terms of the stability of crude oil supply.

The outlook for the industry’s mid- to long-term prospects is also relatively optimistic. Hanwha Investment & Securities explains that it expects the global refining market to show a trend of demand exceeding supply from before the war through 2028. In addition, after the formal start of post-war reconstruction demand, diesel demand may further increase, and the time required for production facilities to return to normal is also viewed as a reason that supports a high-profit environment. This means that, while supply cannot be increased quickly, if demand is maintained or expands, refining margins are expected to remain at high levels.

Based on the above assessments, Hanwha Investment & Securities forecasts that S-Oil’s full-year 2026 operating profit will reach 2.389 trillion won. This is far more than 10 times last year’s operating profit of 236 billion won. In the short term, oil price volatility and government policies may affect performance, but if the improved outlook for crude oil procurement competitiveness and the refining industry is combined, the outlook for S-Oil’s performance is expected to remain strong in the near term.