Kumho Petrochemical, Earnings Decline Expected to Continue

[Asia Economy Reporter Park Jihwan] Samsung Securities forecasted on the 5th that Kumho Petrochemical's operating profit for the fourth quarter of last year will record 48 billion KRW, down 30% from the previous quarter. Accordingly, the investment opinion was set to neutral, with a target stock price of 80,000 KRW.

Cho Hyun-ryeol, a researcher at Samsung Securities, stated, "The additional decline in profitability of synthetic rubber and the widening deficit in the phenol business division are expected to negatively impact profitability."

According to Samsung Securities, Kumho Petrochemical's synthetic rubber division is expected to have an operating profit of 28.3 billion KRW in the fourth quarter of last year, down 35% from the previous quarter. The decrease in profitability was attributed to the use of expensive butadiene (BD) purchased in the third quarter of last year and the decline in the spread of specialty rubber.

In synthetic resin, an operating profit of 7.5 billion KRW, down 15%, is expected. However, the energy division is expected to achieve an operating profit of 22.7 billion KRW, up 17% from the previous quarter, due to an improvement in the sales price (SMP).

Researcher Cho Hyun-ryeol said, "Since Kumho Petrochemical entered the deficit phase earlier than other companies, there is a slight expectation for recovery of supply-demand balance through capacity adjustments by low-profit companies," adding, "However, the operating profit consensus for this year of 384 billion KRW is 19% higher than the estimate, and downward pressure on the stock price is expected to continue amid the downward revision phase of profit estimates."

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