[Click eStock] "Korea Gas Corporation, Overseas Business in Q2 Passes Worst"

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities analyzed on the 20th that Korea Gas Corporation's second-quarter performance was sluggish due to large-scale impairment losses in overseas projects, but the worst situation has passed as of this quarter, and the current stock price is positioned at the lowest point of the price-to-book ratio (PBR) band. Considering this, they maintain their investment opinion and target price.

Korea Gas Corporation posted an operating loss of 96.7 billion KRW in the second quarter, falling short of market consensus.

According to Kiwoom Securities, Korea Gas Corporation's performance is divided into domestic gas wholesale business and overseas resource projects. Since the domestic gas wholesale business, which accounts for most of the performance, recovers the appropriate investment return set annually at a quarterly rate, the quarterly results have little significance compared to consensus. It is explained that as of July 1 this year, the adjustment of gas wholesale supply costs was completed, securing about 120 billion KRW in operating profit annually from the gas wholesale business.

Researcher Lee Jong-hyung diagnosed, "However, due to continued weak heating and cooling demand, expansion of LNG direct import volumes by private power companies, and weakened price competitiveness compared to LPG, gas sales amounted to 5.66 million tons, marking a decrease compared to the same period last year for six consecutive quarters, which is unfavorable for the company from a mid- to long-term perspective."

Meanwhile, the combined operating profit of five major overseas projects was only 9.1 billion KRW, showing very poor performance compared to 53.5 billion KRW in the first quarter and 55.8 billion KRW in the second quarter of last year.

Researcher Lee analyzed, "The operating profit decreased by more than 30 billion KRW compared to the first quarter due to reduced cost recovery sales in the Iraq Jubail and Badra projects, and the Australian GLNG and Prelude projects also saw a decrease of over 10 billion KRW in operating profit compared to the first quarter due to falling oil prices and delays in facility reactivation."

Reflecting these second-quarter results, the net income attributable to controlling interests forecasts for 2020 and 2021 were adjusted to -45.8 billion KRW (revised downward due to turning to a deficit) and 401.3 billion KRW (up 25%), respectively.

Researcher Lee stated, "Although the performance momentum remains weak in the second half, the possibility of oil prices rebounding and then falling again from the $40 range is low. Overseas projects have passed the worst situation as of the second quarter, and considering that the current stock price is at the lowest point of the PBR band, we maintain our investment opinion and target price."

This content was produced with the assistance of AI translation services.