1. Q2 2025 Performance: A Story of Gains and Losses

Michang Oil Industrial reported a 32.3% year-over-year increase in net profit to KRW 38.9 billion. However, sales and operating profit declined by 11.3% and 28.6% to KRW 104.1 billion and KRW 8.5 billion, respectively. What’s driving these contrasting results?

2. The Net Profit Paradox: Focus on One-Off Gains

The substantial increase in net profit is primarily attributed to one-off gains, such as positive financial asset valuations. This raises concerns about the sustainability of such growth, especially considering the declining sales and operating profit trends.

3. Declining Sales and Operating Profit: The Impact of Oil Prices, Exchange Rates, and Competition

Rising international oil prices and unfavorable exchange rates have significantly increased Michang Oil’s cost burden, impacting operating profit. Increased competition within the lubricant market may also be contributing to the decline in sales.

4. Investor Action Plan: 5 Key Checkpoints

  • 1. Sustainability of Net Profit Growth: Analyze profitability after excluding one-off gains to gain a clearer picture of the company’s financial health.
  • 2. Strategies for Managing Cost and Exchange Rate Fluctuations: Assess Michang Oil’s ability to navigate external economic pressures.
  • 3. Monitoring High Inventory Levels: The substantial KRW 59 billion in inventory poses a potential risk factor that warrants careful observation.
  • 4. Tracking Macroeconomic Indicators: Anticipate the impact of fluctuating oil prices, exchange rates, and interest rates on Michang Oil’s performance.
  • 5. Re-evaluating Valuation: Determine whether the current stock price accurately reflects the company’s intrinsic value and future growth prospects.

Investing in Michang Oil Industrial requires a cautious approach. Consider both the positive and negative aspects before making any investment decisions and develop a long-term strategy based on thorough due diligence.