S-Oil stock surged over 21% in one week from July 2 to July 9, rising from 109,600 won to 133,500 won, as domestic brokerages raised target prices on expectations the company will post a Q2 earnings surprise. Hana Securities on July 7 lifted its target price from 130,000 won to 200,000 won, projecting Q2 operating profit of 1.02 trillion won versus the market consensus of 900 billion won. The rally reflects investor confidence that record lubricant base oil earnings will offset temporary refining segment pressures from inventory valuation losses and cost burdens. Analysts cite the lubricant segment's resilience following Shell's Qatar plant damage in March, which removed 30,000 barrels per day of Group 3 base oil supply and drove export prices to $233 per barrel in May. The refining segment faced approximately 400 billion won in inventory losses in Q2 due to falling oil prices and S-Oil's FIFO accounting method, but brokerages view this as a temporary accounting effect with limited impact on full-year profitability.
Hana Securities Raises S-Oil Target Price to 200,000 Won on Q2 Profit Forecast
Hana Securities on July 7 raised S-Oil's target price from 130,000 won to 200,000 won, citing an expected Q2 operating profit of 1.02 trillion won that would exceed the market consensus of 900 billion won. Korea Investment & Securities set a target of 160,000 won, Samsung Securities 150,000 won, and BNK Investment & Securities 160,000 won. FnGuide's compilation of domestic brokerage forecasts projects S-Oil's full-year revenue at 41.7125 trillion won, operating profit at 3.5619 trillion won, and net profit at 2.5144 trillion won — representing year-over-year increases of 1,411.7% in operating profit and 1,320.9% in net profit.
Lubricant Base Oil Segment Posts Record Profit Following Shell Qatar Plant Disruption
S-Oil's lubricant base oil division is expected to generate over 1.5 trillion won in operating profit for the full year, according to Korea Investment & Securities researcher Lee Chung-jae. The segment's record performance follows the March destruction of Shell's gas liquefaction facility in Qatar, which halted 30,000 barrels per day of Group 3 lubricant base oil production. Ulsan-region lubricant base oil export prices rose to $233 per barrel in May due to the supply shortage. BNK Investment & Securities projects the lubricant segment will post its highest-ever operating profit, offsetting a decline in refining segment earnings from 1.039 trillion won in Q1 to 599.2 billion won in Q2. The refining segment's Q2 performance reflects approximately 400 billion won in inventory valuation losses from falling oil prices, increased raw material costs, and opportunity losses from government price cap measures. BNK researcher Kim Hyun-tae noted that S-Oil's use of FIFO accounting concentrates inventory losses in Q2 during oil price declines, while government compensation for price cap-related losses is expected to be reflected in Q4 accounting.
Saudi Aramco Cuts August Crude OSP by $11 per Barrel
Saudi Aramco on July 6 (local time) reduced its August delivery Arab Light crude oil official selling price (OSP) by $11 per barrel from the previous month, setting it at $1.50 below the Oman-Dubai average — the largest monthly reduction since 2000. The price cut reflects increased supply following the resumption of crude transport through the Strait of Hormuz, OPEC+ production increases, and competitive output expansion from the United Arab Emirates after its OPEC withdrawal. Aramco holds a 63.4% stake in S-Oil as the largest shareholder. Hana Securities researcher Yoon Jae-sung stated that Saudi OSP is expected to turn negative from August, representing a structural cost reduction for S-Oil despite a potential slight decline in Q3 operating profit due to time lag effects. Yoon characterized the current stock price level as "a confident buying zone" given the anticipated strong earnings and dividend appeal.
Analysts Project S-Oil Dividend Yields of 3.6% in 2025 and 7.7% in 2026
Hana Securities projects S-Oil's dividend per share at 4,200 won for this year and 9,000 won for next year (assuming a 40% payout ratio), implying dividend yields of 3.6% and 7.7% respectively. BNK Investment & Securities researcher Kim Hyun-tae stated that dividend attractiveness will increase as the large-scale capital expenditure for the Shaheen project — a major petrochemical investment initiative — enters its final phase, coinciding with a surge in earnings.
FAQ
What caused S-Oil stock to surge 21% in one week from July 2 to July 9?
S-Oil stock rose from 109,600 won to 133,500 won as domestic brokerages raised target prices based on expectations that Q2 operating profit would reach 1.02 trillion won, exceeding the market consensus of 900 billion won. Hana Securities on July 7 increased its target price from 130,000 won to 200,000 won.
Why did S-Oil's lubricant base oil segment post record profit expectations?
The segment benefited from Shell's Qatar plant damage in March, which halted 30,000 barrels per day of Group 3 lubricant base oil supply. This supply disruption drove Ulsan-region export prices to $233 per barrel in May, and analysts project the segment will generate over 1.5 trillion won in operating profit for the full year.
How did Saudi Aramco's August crude oil price cut affect S-Oil's cost structure?
Saudi Aramco on July 6 reduced its August Arab Light crude OSP by $11 per barrel — the largest monthly cut since 2000 — setting it $1.50 below the Oman-Dubai average. As Aramco owns 63.4% of S-Oil, analysts view the OSP turning negative from August as a structural cost reduction that will improve profitability despite temporary Q3 time lag effects.
