[Click eStock] "Kumho Petrochemical Target Price 200,000 Won, Buy Rating Maintained"

[Asia Economy Reporter Park So-yeon] On the 19th, SK Securities downgraded Kumho Petrochemical's target stock price from 250,000 KRW to 200,000 KRW, while maintaining a buy rating.

Hansem Park, a researcher at SK Securities, evaluated, "The third quarter operating profit exceeded market expectations, raising expectations for solid annual performance, and the recent decline in the raw material butadiene price is positive for the profitability of the rubber business division."

However, he mentioned, "The price of NB latex, which benefited during the COVID-19 period, is declining due to increased supply from capacity expansions, which is a burden," and added, "Currently, the low valuation and dividend yield are attractive."

Recent third-quarter operating profit surpassed market expectations. Despite a decrease in profitability due to the rise in the raw material butadiene (BD) price, synthetic rubber achieved a 29% profit margin, recording solid performance. Meanwhile, the previously soaring butadiene price has stabilized. The price, which rose to an average of $1,410 per ton in the third quarter, is currently at $845 per ton, lower than the average of the past two quarters. The easing of cost burdens in the fourth quarter is positive, and even considering scheduled maintenance, absolute performance this year is expected to remain solid.

Stabilizing product prices pose a burden in terms of scale. The price of synthetic rubber SBR fell from $2,170 per ton in mid-third quarter to $2,020 per ton currently. Additionally, the price of NB latex, which benefited during the COVID-19 period, is weakening due to downward pressure from additional supply coming from capacity expansions. While the decline in raw material prices is positive for profitability, the drop in product prices is expected to be a burden in terms of scale.

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