Waste Management Stocks Welcoming the Monsoon Season

Y&Tech, KG ETS, Koentec, etc. Strong Amid Record Heavy Rain... Expected Benefits from Increased Workload

On the 2nd, when a heavy rain warning was issued for the central region, the water level of Tancheon Stream in Songpa-gu, Seoul, rose due to the large amount of rain. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Park Jihwan] Investors are focusing on waste-related stocks amid news of unprecedented heavy rain. With expectations that damage will surge due to a deluge of up to 300mm in the central region, demand for waste disposal, including garbage, is anticipated to increase.

According to the Korea Exchange on the 3rd, waste disposal company Y&Tech was trading at 13,050 KRW as of 9:15 a.m., up 4.82% from the previous trading day. At the same time, other waste disposal companies such as KG ETS (3.49%), Koentec (6.01%), and Inseon ENT (5.90%) also showed strong performance.

These companies are expected to maintain their upward trend as they benefit seasonally from the monsoon season and show stable growth in earnings. Y&Tech’s stock price rose 12.2% from 11,100 KRW on the 1st of last month to 12,450 KRW at the end of the month, clearly benefiting from the monsoon season. KG ETS (6.4%), Koentec (4.2%), and Inseon ENT (9.7%) also showed steady gains during this period.

The stock prices of waste industry companies have also risen significantly compared to the previous year. Except for Koentec, which fell 27%, Y&Tech (71%), KG ETS (26%), and Inseon ENT (27%) all saw substantial increases as of the previous trading day. This rise in waste stock prices is attributed to solid earnings and a supply-advantaged market environment.

In the securities industry, it is expected that the operating profit margin of the waste industry will reach 22% this year, up 3 percentage points from the previous year. Particularly, the supply-advantaged market has led to an increase in disposal fees. Over the past five years, the average annual increase rates for landfill and incineration fees have been 15% and 9%, respectively, contributing to improved profit margins for waste companies. Domestic waste generation has also shown a steady annual increase of 3%.

Above all, the structure makes it difficult for new companies to enter the market, which is a strength. To operate waste disposal businesses, government approval and consent from nearby residents are required, and finding locations that allow the entry of nuisance facilities is challenging. While demand for waste disposal continues to rise, processing capacity cannot keep up, resulting in a persistent supply-demand imbalance in the market. Additionally, the full implementation of fines for illegal waste dumping since May is a positive factor.

Seo Hyewon, a researcher at Kiwoom Securities, said, "Even if new waste landfill sites are approved, it takes at least five years before they can begin operations," adding, "The market dominance of existing large companies is expected to expand further for the time being."