[Click eStock] Kumho Petrochemical, Continuous Expansion Effects 'Earnings Expectations'

On the 22nd, IBK Investment & Securities maintained its buy rating and target price of 180,000 KRW for Kumho Petrochemical. This outlook is based on the expectation that the company will rebound from the first half of the year and continue to deliver differentiated performance compared to other general-purpose petrochemical companies.

Lee Dong-wook, a researcher at IBK Investment & Securities, stated, "Despite the continued poor performance of NB latex this second half of the year, the effect of high-priced raw materials used in the first half will be removed starting this second half, leading to an expected improvement in lagging spreads." He added, "Due to the ongoing oversupply of upstream basic and intermediate feedstocks, cost reduction effects for downstream companies like Kumho Petrochemical are expected to be maintained in the second half of this year." He continued, "To take advantage of the lowered butadiene prices, the butadiene plant utilization rate, which exceeded 100% in 2021, was operated at a low rate of 72% last year and below 40% in the first half of this year." Furthermore, he noted, "recent increases in oil prices and rising electricity demand have caused a rebound in the System Marginal Price (SMP) for electricity wholesale prices, which will also help improve performance after the second half of this year."

Looking ahead to next year, the overall petrochemical industry is expected to improve compared to this year, with additional effects from capacity expansions. By the end of next year, Kumho Petrochemical's synthetic rubber production capacity is projected to increase by 14%, synthetic resin by 4%, polyurethane raw material (MDI) by 50%, and EPDM by 30% compared to this year. Carbon nanotubes (CNT) saw a 20% increase in sales in the first half of this year compared to the previous year, driven by strengthened promotions to battery manufacturers and recovery in the European electric vehicle tray market demand. Production capacity will be expanded from the current 120 tons to 360 tons by next year. Additionally, if the glycerin process ECH plant, a joint venture with OCI, is completed, cost improvements related to epoxy are also expected.

The researcher added, "EPDM, a major product of Kumho Polychem, continues to show solid performance. North American demand has recently increased, and due to export restrictions on Russian synthetic rubber and rationalization of competitors' facilities over recent years, a solid supply-demand balance is being maintained." Meanwhile, the global EPDM market size is expected to grow at an average annual rate of 6.5%, from 1.8 million tons last year to 2.45 million tons by 2027.

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