[Click eStock] "Management Dispute Settled at Kumho Petrochemical, Now a Major Earnings Stock"

1Q Operating Profit Expected to Exceed 500 Billion KRW, Record High Performance Forecast
Surprise Earnings Anticipated in 2Q as Global Infrastructure Investment Expands

Shareholders are attending the '44th Kumho Petrochemical Annual General Meeting' held on the 26th at Kumho Petrochemical in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Minwoo Lee] With the management dispute at Kumho Petrochemical coming to a close, there is an analysis that the focus should now be on its performance. Amid favorable factors such as a strong U.S. housing market, increased ship orders, and rising infrastructure investments, the company is expected to show record-breaking growth.

On the 29th, Hana Financial Investment maintained a 'Buy' rating on Kumho Petrochemical and raised the target price by 16.3% to 500,000 KRW. The previous trading day's closing price was 239,000 KRW. This follows the shareholder meeting held on the 26th, where Kumho Petrochemical Chairman Park Chan-gu achieved a decisive victory over Executive Director Park Cheol-hwan, signaling that the company can now be viewed as a performance-driven stock.

Earlier, Executive Director Park, the youngest son of the late Kumho Group Chairman Park Jung-gu and the largest individual shareholder of Kumho Petrochemical, announced at the beginning of this year that he would sever special relations with his uncle, Chairman Park Chan-gu, signaling a management dispute. He aggressively proposed shareholder initiatives, including groundbreaking high dividend plans and changes to management and the board of directors, but at this shareholder meeting, Chairman Park's side won all agenda items, including dividends, board improvements, and the appointment of inside and outside directors. Even the highly anticipated entry of Executive Director Park into the board was blocked. However, Executive Director Park managed to raise his profile and received favorable evaluations, which may help him expand his support base in the future.

With the management dispute now settled, the atmosphere is set to focus on Kumho Petrochemical's performance. Strong results are expected starting from the first quarter. Hana Financial Investment forecasts that Kumho Petrochemical will achieve consolidated sales of 1.7447 trillion KRW and operating profit of 563.2 billion KRW in Q1 this year. This represents an all-time high with sales up 42.4% and operating profit up 299.7% compared to the same period last year. These figures significantly exceed market consensus estimates of 1.5042 trillion KRW in sales and 361.3 billion KRW in operating profit. Having delivered 12 'surprise earnings' out of 17 recent earnings announcements, the upward trend is drawing attention. Researcher Yoon Jae-sung of Hana Financial Investment explained, "This is thanks to the strong performance of core products such as NBL, BPA, acetone, and ABS, along with increased contributions from SBR/BR, epoxy, PPG, and energy."

The outlook for the second quarter is also bright. Operating profit is expected to reach 604.5 billion KRW, again surpassing consensus by 82%, marking a record high. Researcher Yoon analyzed, "March margins were the best, and considering the recovery in the downstream market, the strong market conditions are likely to continue."

NBL is expected to steadily improve due to explosive growth in glove usage and capacity expansion in China. Recently, Chinese glove manufacturers announced plans to increase capacity more than tenfold by 2023. The strong U.S. housing market, increased ship orders, and global infrastructure investments are positive factors for epoxy, phenol chain, and MDI. Additionally, a high dividend yield is anticipated. Applying the company's dividend payout guidance, the dividend per share (DPS) is estimated to be at least 8,000 KRW. Researcher Yoon stated, "With net cash estimated at 760 billion KRW by the end of this year and 2.3 trillion KRW next year, a solid financial structure supports expectations for new business expansion and additional dividend increases. The recent shareholder meeting also prompted the company to consider improving corporate value, shareholder returns, and governance, which is a positive development."

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