[Click eStock] "Kumho Petrochemical Expected to See Significant Increase in Operating Profit"

Kiwoom Securities "Kumho Petrochemical Target Price Lowered from 600,000 KRW to 550,000 KRW"
Expected Improvement in Synthetic Rubber, Synthetic Resin, and Phenol Derivatives Segments Performance

[Asia Economy Reporter Gong Byung-sun] It is anticipated that Kumho Petrochemical's operating profit for the second quarter of this year will increase significantly. This is due to improved performance in sectors such as synthetic rubber, synthetic resin, and phenol derivatives. Kiwoom Securities has lowered the target price for Kumho Petrochemical from the previous 600,000 KRW to 550,000 KRW, while maintaining a 'buy' investment rating.

According to Kiwoom Securities on the 2nd, the operating profit for the second quarter of this year is expected to reach 686.9 billion KRW, a 471.7% increase compared to the same period last year. This continues the record-high operating profit following the previous quarter.

The operating profit in the synthetic rubber sector is expected to be 302.7 billion KRW, a 526.7% increase compared to the same period last year. This is due to the volume increase effect from the expansion of NB latex production and a sharp rise in prices and spreads of most synthetic rubber products driven by favorable upstream market conditions.

The synthetic resin sector also showed significant improvement. Operating profit for synthetic resin is projected at 95 billion KRW, a 305.9% increase compared to the same period last year. Rising raw material prices led to higher product prices, and with the arrival of a manufacturing upturn, demand for high value-added synthetic resins such as ABS for home appliances and compounding is expected to increase. Operating profit for phenol derivatives is expected to reach 260.9 billion KRW, a 651.9% increase compared to the same period last year. This is due to tight supply and demand causing sharp increases in prices and spreads of bisphenol A (BPA) and epoxy resins.

However, Kiwoom Securities took a conservative view on Kumho Petrochemical's stock price. Competitors are showing movements to expand NB latex production. Additionally, the stock price has been weak due to expectations of a performance peak-out after the first half of this year. Therefore, net debt was applied against next year's EBITDA rather than this year’s. Researcher Lee Dong-wook of Kiwoom Securities stated, “We expect strategies to enhance shareholder value announced previously, such as overseas new expansions and securing new growth platforms, to expand and execute a business structure that can receive a high multiple.”

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