SK Innovation: Strength in lube base oil and refining margins persists as brokerages raise target prices one after another

[Financial News] Refining margins and premium lube base oil prices have remained strong longer than expected, prompting upward revisions to earnings forecasts for SK Innovation. Brokerages are raising their target prices one after another, lifting profit estimates not only for this year but also for next year.
According to financial investment industry sources on the 8th, DB Securities maintained its “Buy” rating on SK Innovation and raised its target price from 150,000 won to 200,000 won.
DB Securities estimated SK Innovation’s operating profit for the third quarter of this year at 3.013 trillion won. That would be down 13.6% from the previous quarter but up 414% year over year, and is expected to exceed the market consensus of 2.78 trillion won over the past month.
Lube base oil is expected to drive an improvement in SK Innovation’s earnings. According to DB Securities, the spread between lube base oil export prices and Dubai crude prices widened 64.7%, from $139 per barrel in the second quarter to $229 in the third quarter this year. Accordingly, it estimated that operating profit in the lubricants division would increase 40.2%, from 692 billion won in the second quarter to 970 billion won in the third. It also expected operating profit in the petroleum division to remain at a similar level to the previous quarter, at 1.825 trillion won.
SK Enmove’s production capacity was also seen as a factor that could affect future earnings. DB Securities said SK Enmove’s Group III lube base oil production capacity is around 80,000 barrels per day, among the largest in the world. Its utilization rate in the first half of this year was 62%, indicating room to increase production compared with major domestic competitors, whose utilization rates are around 100%. DB Securities said continued supply disruptions at Middle Eastern competitors could lead to new customer acquisitions and higher utilization.
Eugene Investment & Securities and LS Securities had also raised their earnings forecasts and target prices for SK Innovation. On the 6th, Eugene Investment & Securities raised its target price for SK Innovation from 171,000 won to 175,000 won and maintained its “Buy” rating. It raised its operating profit forecast for this year from 10.124 trillion won to 10.71 trillion won, and its forecast for next year from 2.182 trillion won to 6.349 trillion won. The revisions reflected the fact that diesel, gasoline and lube base oil margins have remained higher than expected.
LS Securities also raised its rating to “Buy” that day and set a target price of 187,000 won. It estimated operating profit at 11.045 trillion won this year and 8.753 trillion won next year. The estimates reflected its view that reduced supplies of medium and heavy crude, combined with a mismatch in the configuration of global refining capacity, could lead to shortages of kerosene, diesel and Group III lube base oil lasting at least a year.
Brokerages’ forecasts for SK Innovation’s earnings this year are similar, but their outlooks for next year differ. The 2026 operating profit forecasts are 10.66 trillion won from DB Securities, 10.71 trillion won from Eugene Investment & Securities, and 11.045 trillion won from LS Securities—ranging from 10.6 trillion won to the low 11-trillion-won range. By contrast, their 2027 forecasts range from 6.349 trillion won to 8.753 trillion won, a difference of about 2.4 trillion won. The gap reflects differing outlooks for refining margins and lube base oil market conditions.
Some uncertainties remain. Eugene Investment & Securities said refining margins could be partly eroded from the fourth quarter of this year if high ocean freight rates are reflected in costs after a time lag. LS Securities cited contraction in the pouch-type battery market and a decline in SK On’s utilization rate as factors weighing on profitability.
Han Seung-jae, a researcher at DB Securities, said, “As the prolonged war depletes global oil inventories and winter sets in, the refining, lube base oil, E&P, gas and power generation portfolio will come further into focus.”

[email protected] Kim Mi-hee Reporter