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Analysts optimistic that SK Innovation’performance will improve in 2nd half

Analysts in South Korea maintained optimistic toward SK Innovation, the nation’s top refiner, despite a downturn in its second-quarter earnings forecast due to low global crude prices.

The fall in the second quarter will be “transient,” analysts say, while SK Innovation stocks will bounce back in the second half of this year, due to the seasonal upward push of crude prices and the refining margin from August to winter on the back of soaring demand.

“Seasonal factors of the refining margin will shape out the profit gain (of SK Innovation) in the third quarter,” wrote Hwang Yoo-shik of NH Investment & Securities.

Hwang added that SK Innovation’s high dividend payout ratio would “garner investors’ attention,” in line with the refiner’s decision to pay out interim dividends in June for the first time.

The refining margin on the rise since June is expected to “bring focus on the revived growth momentum in the third quarter,” another analyst, Daniel Lee of Korea Investment & Securities, wrote in a note. “Concerns about the slide in SK Innovation stock price appear to have already been reflected.”

The second-quarter operating profit of SK Innovation is forecasted to drop by between 48 and 57.4 percent on-year, according to multiple reports by analysts. 

Kim Jun, chief executive of SK Innovation, speaks at a press conference at the company’s headquarters in Seoul on May 30. (SK Innovation)
Kim Jun, chief executive of SK Innovation, speaks at a press conference at the company’s headquarters in Seoul on May 30. (SK Innovation)
Slumps in oil prices, despite the global supply cut during the second quarter, are predicted to trigger losses in the valuation of inventories at local refiners, including SK Innovation.

Dubai fell 18.1 percent over the second quarter, from $54.10 per barrel as of the first week of March to $45.20 per barrel in the final week of June. Meanwhile, the gross refining margin by SK Innovation slightly increased from $5.50 per barrel in the first week of March to $6.80 per barrel in June.

By Son Ji-hyoung (consnow@heraldcorp.com)
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