KOSPIOil Refining010950

S-Oil

₩164,900▲ 10.82%2026-10-02 close

Market Cap

₩18.7T

Turnover

₩74.9B

Volume

460,000 shares

Shares out.

110M

PER

12.0×

PBR

1.8×

EPS

₩13,089

Dividend Yield

0.21%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩330 per share · Prices as of the 2026-10-02 close

Report overview

Between Peak Refining Margins and the Shaheen Startup

Earnings have rebounded sharply on refining and lube spreads driven by geopolitical supply disruptions, while the completion and startup timeline of the 9-trillion-won Shaheen project and the durability of this cycle are the swing factors ahead.

1
First-half 2026 operating profit totaled 2.196 trillion won (1.231 trillion won in Q1 and 965.0 billion won in Q2), more than nine times the 235.6 billion won recorded for the whole of 2025.
2
In Q2 2026 the refining unit posted 9.03 trillion won of revenue and 532.4 billion won of operating profit, lubricants 1.30 trillion won and 477.4 billion won, while petrochemicals recorded a 44.8 billion won operating loss.
3
The Shaheen project was 95% complete as of a March 2026 filing and the company still targets commercial operation in early 2027 after second-half trial runs, but repeated fatal accidents and partial work-stoppage orders keep schedule risk alive.
4
The recovery shows up in cash flow: operating cash flow reached 3.942 trillion won in 2025 versus 1.468 trillion won in 2024, although the heavy investment cycle lifted the debt-to-equity ratio to 198.8% at end-2025.
5
Shareholder returns run under a guideline of a 20%-plus payout ratio for FY2025-FY2026; the 2025 payout ratio was 20.6%, and in August 2026 the board approved an interim dividend of about 93.1 billion won in total.

Business structure

S-Oil is a refiner operating three segments - refining, lubricants and petrochemicals - centered on its Onsan industrial complex in Ulsan, with the Saudi Aramco group as its largest shareholder.

Refining dominates the top line: in Q2 2026 segment revenue was 9.03 trillion won for refining, 1.30 trillion won for lubricants and 1.01 trillion won for petrochemicals.

Profit composition moves differently from revenue mix; in the same quarter operating profit was 532.4 billion won in refining, 477.4 billion won in lubricants and a 44.8 billion won loss in petrochemicals, meaning lubricants contributed profit far above its revenue share.

The lubricants business is centered on high-viscosity-index Group III base oils, and in Q2 2026 its spreads hit record levels as Middle East production outages and logistics constraints tightened supply.

Petrochemicals spans aromatics such as paraxylene and benzene plus olefin downstream products including polypropylene and propylene oxide, so spread direction diverges by product. Crude sourcing leans heavily on parent Aramco, so changes in the Saudi official selling price feed directly into costs.

Domestically the company competes within a four-refiner structure alongside SK Innovation, GS Caltex and HD Hyundai Oilbank, with high export exposure to regional refinery run rates.

Its growth axis, the Shaheen project, involves 9.258 trillion won of investment in a steam cracker with 1.8 million tons of annual ethylene capacity plus TC2C facilities that convert crude directly into petrochemical feedstock; once running, the petrochemical share of output volume is expected to rise from around 12% to roughly 25%.

Earnings trend

Quarterly revenue · Operating profit

₩8T-₩344B25Q2₩8.4T₩229.2B25Q3₩8.8T₩371.9B25Q4₩8.9T₩1.2T26Q1₩11.3T₩965B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩42.4T₩3.4T2022₩35.7T₩1.4T2023₩36.6T₩422.2B2024₩34.2T₩235.6B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩8T	-₩344B	−4.3%
2025Q3	₩8.4T	₩229.2B	2.7%
2025Q4	₩8.8T	₩371.9B	4.2%
2026Q1	₩8.9T	₩1.2T	13.8%
2026Q2	₩11.3T	₩965B	8.5%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩42.4T	₩3.4T	₩2.1T	8.0%	24.8%	131.2%
2023	₩35.7T	₩1.4T	₩948.8B	3.8%	10.5%	138.7%
2024	₩36.6T	₩422.2B	-₩193B	1.2%	−2.2%	181.2%
2025	₩34.2T	₩235.6B	₩177B	0.7%	2.0%	198.8%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

Results narrowed for three consecutive years after the 2022 peak of 42.45 trillion won in revenue and 3.405 trillion won in operating profit (an 8.0% margin): 1.355 trillion won in 2023 (3.8%), 422.2 billion won in 2024 (1.2%) and 235.6 billion won in 2025 (0.7%).

The trough came in 2024 with a net loss attributable to owners of 193.0 billion won, followed by only a slim 177.0 billion won profit in 2025.

Quarterly, the company moved from a 344.0 billion won operating loss in Q2 2025 to 229.2 billion won in Q3 and 371.9 billion won in Q4, then to a different order of magnitude with 1.231 trillion won in Q1 2026 and 965.0 billion won in Q2.

First-half operating profit of 2.196 trillion won is more than nine times the full-year 2025 figure. The 21.6% quarter-on-quarter decline in Q2 operating profit reflected the disappearance of one-off inventory-related gains booked in Q1, with a record quarterly profit in lubricants offsetting much of the drop.

Revenue rose 26.8% from the prior quarter and 40.9% year on year on higher crude prices. Net profit attributable to owners swung from a 66.8 billion won loss in Q2 2025 to a 514.6 billion won profit in Q2 2026, totaling 1.524 trillion won over the four quarters from Q3 2025 to Q2 2026.

Cash generation also improved, with 2025 operating cash flow of 3.942 trillion won more than double the 1.468 trillion won of 2024. However, heavy capital spending pushed total liabilities to 17.67 trillion won at end-2025 and the debt-to-equity ratio to 198.8%, a sharp increase in leverage from 131.2% in 2022.

Industry analysis

The current refining cycle is driven more by supply disruption than by demand recovery. In its Q2 2026 briefing the company said refining margins rose sharply as product supply tightened, even as crude price volatility increased on Middle East conflict and the Strait of Hormuz blockade.

It also noted that global inventories of crude, gasoline and diesel are all running below the bottom of the past five-year range, while Russian product export curbs and Middle East refinery outages deepen the shortfall.

Reports in early September 2026 said Russia extended its diesel export ban to September 30 while European diesel refining margins topped 100 dollars per barrel for the first time, an environment described as favorable for the export margins of Korea's four refiners.

In a second-half sector outlook dated May 22, 2026, Shinhan Securities projected WTI at 80-90 dollars per barrel and complex refining margins around 26 dollars per barrel for the second half, and named S-Oil as the main beneficiary of strong refining margins.

In an August 2026 note, analyst Hwang Kyu-won of Yuanta Securities estimated the company's complex refining margin above 41 dollars per barrel in the second and third quarters, higher than the roughly 39 dollars of US refiner Valero.

Petrochemicals tells a different story: in Q2 2026 paraxylene spreads narrowed on a surge in feedstock prices and polypropylene weakened on cost pressure and soft demand, leaving the segment in the red.

The sector position therefore combines a supply-shock premium in refining and lubricants with structural oversupply in petrochemicals.

Outlook

On its Q2 2026 call the company said it expects tight supply-demand conditions and firm market fundamentals to persist into the second half, citing Middle East supply disruptions and markedly low global inventories.

For lubricants it guided to solid profitability for some time, as production outages continue in the Middle East, which supplies roughly 30% of Group III base oil.

For Shaheen, a March 2026 corporate value-up filing put progress at 95%, in line with plan, and the Q2 briefing said verification work for mechanical completion is under way, with trial runs in the second half and commercial operation targeted for early 2027.

On the commercial side the company said it has signed annual supply contracts with olefin monomer customers and is running polyethylene pre-marketing, indicating some progress in securing offtake before startup.

However, the end-June mechanical completion target was missed after a partial work-stoppage order following a fatal site accident, and on September 3, 2026 another fatality occurred at the PKG1 site, triggering a partial stoppage covering all fireproofing work.

Financially, management targets a borrowings-to-equity ratio of 80-100%, has flagged the possibility of larger dividends as profits grow, and said it plans to present a separate dividend policy guideline for next year onward.

Korea Economic Daily reported on August 4, 2026 that once capital spending winds down after roughly 2.1 trillion won this year, free cash flow is expected to improve from next year, strengthening capacity for debt reduction and higher dividends.

The outlook therefore hinges on how long the supply-disruption-driven margin strength lasts and on how safety and schedule management at Shaheen shape the timing of initial monetization.

Valuation

PER

12.0×

PBR

1.8×

ROE

16.3%

EPS

₩13,089

BPS

₩86,577

Dividend per share

₩330

With profits rebounding sharply, the earnings multiple calculated on the last four quarters has come down from the distorted levels of 2024-2025, when net losses and an earnings vacuum overlapped, into a more normal range.

Against net assets, however, the shares trade at a premium, a different position from the phases in which Korean refiners changed hands near or below book value.

Even for the same metric, self-calculated and exchange-published values can differ depending on how net assets are measured, so it is worth checking the basis when comparing multiples.

Dividends operate under a guideline of a 20%-plus payout ratio for FY2025-FY2026, the 2025 payout ratio was 20.6%, and any yield shown on screen is computed from the most recently disclosed dividend, so it may not yet reflect the interim dividend approved in August 2026 or the year-end dividend still to be decided.

Broker views diverge: analyst Hwang Kyu-won of Yuanta Securities raised his target price from 175,000 won to 205,000 won in August 2026 while forecasting 2026 operating profit of 5.2 trillion won, Shinhan Securities was reported to have lifted its target from 180,000 won to 200,000 won at the same time, and KB Securities said in a May 11, 2026 note that it maintained a 167,000 won target with operating profit estimates of 4.1 trillion won for 2026 and 2.5 trillion won for 2027.

Given that much of current profit is tied to geopolitical supply disruption, the same multiple can mean very different things depending on where the cycle stands.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

Supply-driven strength in refining margins

In Q2 2026 the refining unit earned 532.4 billion won of operating profit as product supply tightened and margins rose sharply, even through a slump in crude prices.

The company guided to firm conditions in the second half, noting that global crude, gasoline and diesel inventories are all below the bottom of the past five-year range.

In early September 2026 it was reported that European diesel refining margins exceeded 100 dollars per barrel for the first time, amid an extension of Russia's diesel export ban.

Because margins are supported by supply constraints rather than demand recovery, the margin floor may stay higher than in past cycles until those disruptions unwind.

Rising profit contribution from lubricants

In Q2 2026 lubricants generated 1.30 trillion won of revenue, only a low-teens share of the total, yet 477.4 billion won of operating profit, approaching the refining unit's contribution.

Group III base oil spreads hit record highs as Middle East production outages and logistics constraints from the Strait of Hormuz blockade tightened supply. The company expects profitability to stay solid for some time as disruptions persist in the Middle East, which supplies roughly 30% of Group III base oil. A distinctive feature of this cycle is that a second profit engine is partly offsetting refining margin swings.

End of the investment cycle and cash flow

The company said Shaheen was 95% complete as of a March 2026 filing, in line with plan, targeting commercial operation in early 2027 after second-half trial runs. Once running, the petrochemical share of output volume is expected to rise from around 12% to roughly 25%, changing the business mix.

Korea Economic Daily reported on August 4, 2026 that after roughly 2.1 trillion won of capital spending this year completes the build-out, free cash flow should improve from next year, strengthening capacity for debt reduction and higher dividends.

Management has also stated a target of managing borrowings at 80-100% of equity and plans to present a separate dividend policy guideline for next year onward.

Bear factors

Unwinding of the geopolitical premium

A large share of current profit stems from supply disruptions such as the Middle East conflict, the Strait of Hormuz blockade and Russian export curbs. Indeed, Q2 2026 saw crude prices plunge in late June when the Hormuz blockade was temporarily lifted.

If supply normalizes, refining margins and lube spreads could reverse together, and the 193.0 billion won net loss of 2024 and the 344.0 billion won operating loss of Q2 2025 illustrate the sector's downside.

KB Securities also set its 2027 operating profit estimate at 2.5 trillion won in a May 2026 note, far below its 2026 estimate.

Shaheen safety and schedule risk

Following fatalities in May and June 2026, another worker died at the Shaheen site on September 3, 2026, prompting a partial stoppage order covering all fireproofing work at the PKG1 site.

The end-June mechanical completion target was missed because of the stoppages, though the company maintains its early-2027 commercial operation goal.

With investigations under way into possible breaches of occupational safety and serious accident laws, the timing of work resumption and any added cost are hard to predict. Management itself said profitability at initial startup is difficult to gauge now because of volatility stemming from Middle East conditions.

Leverage and petrochemical losses

Heavy investment lifted total liabilities to 17.67 trillion won at end-2025 and the debt-to-equity ratio to 198.8%, up sharply from 131.2% in 2022. The petrochemical segment still posted a 44.8 billion won operating loss in Q2 2026, attributed to narrower paraxylene spreads and weaker polypropylene demand.

Since Shaheen will enlarge this segment's weight, depreciation and early-operation costs may hit the profit line first. If regional oversupply from Chinese capacity additions does not clear, it may take time to verify the profitability of the new facilities.

Risk factors

Crude price and inventory gain volatility

Refining earnings swing not only with product margins but also with inventory-related gains and losses tied to crude price direction. One-off inventory gains boosted Q1 2026 results, and their absence in Q2 cut operating profit by 21.6% quarter on quarter.

Changes in the Saudi official selling price also feed straight into costs; Yuanta Securities said in an August 2026 note that a decline in the OSP would start to be reflected from September. If these variables move the other way, earnings can compress through the same channel.

Safety and regulatory risk

Worker fatalities occurred at the Shaheen site on May 25, June 26 and September 3 of 2026, each followed by a partial work-stoppage order.

The Ministry of Employment and Labor and police are investigating possible breaches of occupational safety and serious accident laws, and resumption depends on safety remediation and official verification.

Given the project's scale, delays can ripple through trial-run and startup preparation and into the timing of initial monetization. Construction is led by a consortium headed by Hyundai E&C, so responses from both owner and contractors are variables.

Uncertainty over the return policy

The company's dividend guideline is a payout ratio of at least 20% for FY2025-FY2026, and the actual 2025 payout ratio was 20.6%. In August 2026 an interim dividend of about 93.1 billion won was approved, and management said it will prepare and present a separate dividend policy guideline for next year onward.

Yet with a stated goal of managing borrowings at 80-100% of equity, it is not yet settled whether recovered profits will be allocated first to dividends or to balance-sheet repair. The content and timing of the new guideline will set the reference point for return expectations.

What to watch next

September 15, 2026
This is the scheduled payment date for the roughly 93.1 billion won interim dividend approved by the board in August. It is the first checkpoint on how quickly the earnings recovery translates into actual cash returns.
Late September to October 2026
Russia's diesel export ban is set to expire on September 30, so whether it is extended - along with the direction of the Saudi official selling price - should be tracked together. These provide the basis for judging whether the supply-disruption premium embedded in refining margins holds.
Late October to early November 2026 (expected)
The Q3 earnings release and conference call should reveal the durability of refining and lube spreads, the scale of inventory-related gains or losses, and the segment profit mix. It is where the company's guidance for firm second-half conditions gets tested against actual numbers.
Fourth quarter of 2026
Key items are confirmation of Shaheen's mechanical completion and the start of trial runs, the resumption date for the fireproofing work halted after the September 3 accident, and the outcome of serious-accident investigations. This period will determine the feasibility of the early-2027 commercial operation target.
Early 2027
Watch for the start of commercial operation at Shaheen, actual execution of annual olefin monomer supply contracts and polyethylene sales, plus the 2026 year-end dividend and the new dividend policy guideline the company has flagged. This is when the first data appear on how a larger petrochemical mix flows into earnings.

Overall view

S-Oil's earnings narrowed from the 2022 peak (3.405 trillion won operating profit, an 8.0% margin) to 235.6 billion won and a 0.7% margin in 2025, then rebounded sharply to 2.196 trillion won in the first half of 2026.

The character of that recovery owes more to supply disruption from the Middle East conflict, the Strait of Hormuz blockade and Russian export curbs than to demand growth; in Q2 2026, refining profit of 532.4 billion won and lubricants profit of 477.4 billion won overwhelmed a 44.8 billion won petrochemical loss.

The company guided to firm second-half conditions on the basis of low global inventories, and several brokerages were reported to have raised their target prices after the Q2 release.

At the same time the debt-to-equity ratio stood at 198.8% at end-2025, and the 9.258 trillion won Shaheen project saw its mechanical completion target pushed back by repeated fatalities and work stoppages at the 95% progress stage.

Management maintains the early-2027 commercial operation goal, leaving post-capex cash flow and a new dividend guideline as the next points of debate.

In sum, the bullish case rests on supply-supported margins and the end of the investment cycle, while the bearish case rests on an unwinding geopolitical premium plus safety, schedule and leverage burdens.

The sequence to verify is margin durability in Q3 results, Shaheen trial-run progress in Q4, and then commercial startup and the return policy in early 2027. This material is for information purposes only and contains no buy or sell recommendation.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.