50% Increase in Ten Days... Kumho Petrochemical on Fire

[Asia Economy Reporter Koh Hyung-kwang] Kumho Petrochemical's stock price has recently shown a sharp upward trend. This appears to reflect expectations that operating profit in the third quarter will increase significantly as performance improves in key areas such as synthetic rubber.

According to the Korea Exchange on the 15th, Kumho Petrochemical was traded at 142,000 KRW on the KOSPI market as of 9:50 a.m., down 2.0% from the previous trading day. Although it showed weakness on this day, it rose for nine consecutive trading days except for one day of stagnation during the 10 trading days from the 25th of last month to the previous day. The increase rate during this period reached 52%.

The rise in Kumho Petrochemical's stock price was led by institutional investors. Institutions have net purchased 36.8 billion KRW worth of Kumho Petrochemical shares from the 24th of last month to the previous day, pushing up the stock price. The large-scale buying by institutions seems to reflect expectations of future performance improvement. Securities firms estimate Kumho Petrochemical's third-quarter operating profit at about 160 billion KRW, which is more than a 130% increase compared to the same period last year. For the full year, Kumho Petrochemical's operating profit is expected to reach the 540 billion KRW range, a 50% increase from the previous year.

In particular, the surge in demand for NB latex, used as a raw material for hygienic gloves due to the impact of the novel coronavirus (COVID-19), is positively influencing Kumho Petrochemical's performance improvement. Yoon Jae-sung, a researcher at Hana Financial Investment, said, "Latex NB latex margins have reached an all-time high, and third-quarter synthetic rubber operating profit is expected to be 90.8 billion KRW, the highest in 10 years," adding, "We anticipate a big cycle for the rubber business next year." Anna Lee, a researcher at eBest Investment & Securities, stated, "Kumho Petrochemical produces NB latex, a beneficiary product of COVID-19. In the second quarter, when the tire industry, a downstream sector, faced difficulties, the increase in demand for medical gloves expanded the NB latex spread (the difference between selling price and raw material price), offsetting margin deterioration," and added, "Moreover, acetone and phenol derivatives, major products of Kumho Petrochemical, are recording the highest operating profit margins, so third-quarter operating profit is expected to exceed expectations."

Kumho Petrochemical is expected to continue its performance improvement across all sectors for some time. Kang Dong-jin, a researcher at Hyundai Motor Securities, said, "Strong demand for polycarbonate (PC) due to the recovery of durable goods demand and the strength of phenol derivatives due to the prolonged COVID-19 situation are continuing together," and predicted, "The raw material benzene is oversupplied, causing prices to fall, which improves the spread, so this trend will continue until the COVID-19 situation stabilizes."

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