[Click eStock] "Jiyok Nanbang Gongsa, Possible Performance Improvement This Year"…Target Price Raised

[Asia Economy Reporter Lee Jung-yoon] Shin Young Securities maintained a buy rating on Korea District Heating Corporation on the 14th, expecting performance improvement this year, and raised the target price to 67,000 KRW.

Korea District Heating Corporation recorded sales of 907.7 billion KRW in the fourth quarter of last year, a 49.2% increase compared to the previous year. Total electricity sales amounted to 542.2 billion KRW, up 122% year-on-year, but operating losses turned to a deficit of 25.8 billion KRW. The rise in natural gas prices leading to increased cost ratios was identified as the cause of the deficit. Researcher Kwon Deok-min of Shin Young Securities explained, "Although the fuel cost linkage system allows offsetting the impact of rising raw material prices through gas sales price increases, the government's price stabilization policy prevented immediate reflection of cost increases in the fees."

Korea District Heating Corporation is expected to see performance improvement in sales and operating profit this year. Shin Young Securities forecasted this year's sales to increase by 17.7% year-on-year to 2.9853 trillion KRW, and operating profit to rise by 159.1% to 102.9 billion KRW.

Researcher Kwon said, "We judged that sales expansion in the heat sector would be limited unless retail price increases occur," but added, "However, electricity sales demand in the industrial sector is expected to increase, and the application of the coal power generation cap system is anticipated to expand the proportion of electricity sales." He also added, "Furthermore, assuming that the SMP (System Marginal Price) does not fall sharply, the electricity sector is expected to sufficiently resolve the uncertainty of sales expansion in the heat sector."

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