[Click eStock] "Korea Gas Corporation, Significant Profit Growth Expected in Q4"

Hana Financial Investment Report
Issuance of New Capital Securities, Low Dilution Concerns

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 62,000 KRW for Korea Gas Corporation on the 10th. This is based on the expectation of improved standalone profits in the fourth quarter and significant profit growth from Australia's Prelude due to strong Asian LNG prices.

In the third quarter, sales reached 5.4 trillion KRW, marking a 58.5% increase compared to the same period last year. This significantly exceeded market expectations, driven by improved gas sales volume and rising oil prices, which greatly boosted overseas business sales. The introduction price of volume linked to oil prices is competitively higher compared to Asian LNG spot prices, predicting further sales performance improvement in the fourth quarter.

Operating profit turned positive, recording 7.8 billion KRW. The deficit in regulated businesses decreased due to changes in the overall cost allocation ratio, accompanied by improvements in overseas business profits. The performance of Australia’s GLNG and Prelude has been steadily improving, and considering the time lag, meaningful profit growth is expected in the fourth quarter as well.

Yoo Jae-sun, a researcher at Hana Financial Investment, said, “When winter temperatures drop, we can expect increased sales of domestic city gas and natural gas for power generation,” adding, “Although it depends on supply and demand conditions, if LNG prices rise again, profits from Australia’s Prelude, which are linked to Asian LNG prices, could improve over the long term.”

Although news of the issuance of new hybrid capital securities based on treasury shares is somewhat seen as a negative factor for stock price rises, it is judged to be positive as the funds can be used for investment in new hydrogen-related businesses. Researcher Yoo explained, “Due to the company’s profit structure characteristics, where interest rates and oil prices are practically connected, it is considered a useful option for inflation hedging purposes.”

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