Updating Japanese Refiners: Crude Price Main Volatility Factor, ENEOS Top Pick

Research evidence excerpt

Updating Japanese Refiners: Crude Price Main Volatility Factor, ENEOS Top Pick

ustments to run rates. A situation of distribution bottlenecks and heightened

uncertainty continues.

NSRP earnings improvement and uncertainty: Potential for a structural turnaround driven by

improved Singapore margins. At the Nghi Son Refinery, and Petrochemical (NSRP) the earnings

environment is improving against the backdrop of rising Singapore market margins, raising the

prospect of a shift away from the previous structure of operating profit but net loss. Utilization

has eased somewhat from a temporary level close to 120%, but has been improving recently and

operations themselves are stable. On the other hand, constraints remain on crude procurement

due to low inventory levels, and details of procurement-related costs such as logistics are not fully

visible, leaving some uncertainty regarding the sustainability of earnings.

Short-term headwinds and recovery assumptions for basic chemicals: Naphtha price surge

compresses spreads, but normalization to prior-year levels assumed from 2Q onward. For

aromatics products, selling prices themselves are rising, but naphtha prices are rising even more,

resulting in a narrowing of spreads. This impact is particularly incorporated into 1Q assumptions,

making short-term earnings pressure unavoidable. However, this price environment is assumed

not to persist, and the scenario assumes a recovery to prior-year levels from 2Q onward as supply-

demand conditions normalize.

Direction of mid-term strategy: Clear shift toward a realistic path centered on maintaining

high refinery utilization and LNG. Within total investments of ¥1,800bn, priority is placed on

strengthening existing businesses, aiming to maintain high utilization rates and expand volumes