JC Chemical, Expectations for Reassessment of Bio Heavy Oil Business

[Asia Economy Reporter Jang Hyowon] Independent research firm Research Alom highlighted that JC Chemical is a company to watch this year as its performance improvement is expected to be solidified with the full-scale effect of capacity expansion.

Choi Seonghwan, Chief Researcher at Research Alom, stated, "There are high expectations for the biofuel business amid environmental issues," adding, "The bio heavy oil business segment, in which 32 billion KRW was invested until last year, will drive growth."

He particularly emphasized that JC Chemical is undervalued in the market by comparing it with SK Chemical, which recently decided to sell its bioenergy business. On the 5th, SK Chemical announced that it would sell its bioenergy business to the private equity firm 'Han & Company.' The sale amount is 380 billion KRW, and the related procedures are planned to be completed through board approval and the shareholders' meeting scheduled for next month.

Bio-diesel is an eco-friendly raw material made by processing palm oil, soybean oil, and others, and it has recently been recognized as the next-generation energy due to its low harmful substance emissions. Currently, the market size in South Korea is about 1 trillion KRW, but since the mandatory blending ratio of domestic bio-diesel is planned to increase from next year, a sharp performance growth is expected in 2020.

Researcher Choi said, "In the current domestic bio-diesel market, SK Chemical holds the largest share at 30%, followed by Aekyung Petrochemical and JC Chemical with 17% and 15%, respectively," and "with JC Chemical making large-scale investments in the bio heavy oil sector until last year, it is understood to be capable of producing bio heavy oil at a level close to the domestic number one."

He continued, "Considering the effect of capacity expansion, JC Chemical's current market capitalization of 120 billion KRW is judged to be significantly undervalued compared to the sale price of SK Chemical's bioenergy business division at 380 billion KRW."

The bio heavy oil sector has been expanding in demand since last year as laws were amended to allow its application to domestic thermal power plants.

Moreover, with the recent implementation of the International Maritime Organization's (IMO) 2020 sulfur oxide emission regulations, requests for testing ship-use bio heavy oil are increasing, and the utilization scope of bio heavy oil is expected to expand in the future.