April 23, 2024

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[THE INVESTOR] SK Innovation will begin to improve in the second half and enjoy a boom until 2019 on the back of refinery margin hike, said Dongbu Securities on July 28, raising the target price to 235,000 won (US$209.54) from 220,000 won.

Its second-quarter operating profit fell 62.4 percent on-year to 422.2 billion won, widely missing market expectations, reflecting the 170 billion won loss from stock valuation following the oil price fall and larger-than-expected opportunity loss from routine maintenance, said analyst Han Seung-jae. 

In the third quarter, however, the figure will leap to 981.1 billion won, as refinery margin is picking up and oil price is bouncing back, according to the analyst. As refinery sector in Middle East struggles to keep up the pace and operation ratio in the US might be adjusted in accordance with stocks, margins in the second half are likely to rise despite being a low season, noted Han. 

Meanwhile, the oil industry will enjoy a boom similar to 2014 when demand spiked from low oil price, said the analyst, suggesting an “overweight” recommendation. 

By Hwang You-mee (glamazon@heraldcorp.com)