Why Korea Gas Corporation's Stock Rises Despite Weak Q4 Earnings

[Asia Economy Reporter Song Hwajeong] Despite weak performance in the fourth quarter of last year, Korea Gas Corporation's stock price is showing strength. Expectations for future earnings recovery and expansion of the hydrogen business are acting as upward momentum.

As of 9:26 a.m. on the 4th, Korea Gas Corporation was trading at 34,200 KRW, up 250 KRW (0.74%) from the previous day. It has shown strength for three consecutive days, recovering the 34,000 KRW level.

Despite the weak performance in the fourth quarter, the market atmosphere is focusing on positive factors such as future earnings recovery and the impact of rising oil prices.

Korea Gas Corporation recorded sales of 5.3823 trillion KRW and operating profit of 260.2 billion KRW in the fourth quarter of last year. These figures represent decreases of 21.84% and 38.08%, respectively, compared to the same period last year. Kim Youngho, a researcher at Samsung Securities, analyzed, "Due to the decline in oil prices, the selling price dropped by 25% compared to the previous year, causing a sharp decrease in sales, and operating profits from major overseas businesses declined, resulting in overall operating profit falling short of expectations."

As oil prices, which were a major cause of last year's poor performance, show signs of recovery, expectations for earnings recovery are also growing. Jung Yongjin, a researcher at Shinhan Financial Investment, said, "The rise in oil prices at the beginning of the year is steep," adding, "The expected oil price based on Korea Gas Corporation's budget is 44.6 dollars per barrel, but the first quarter has already exceeded 60 dollars."

Expansion of the hydrogen business is also expected. Researcher Jung said, "By 2030, we plan to build a hydrogen supply infrastructure of 620,000 tons," and added, "It will achieve commercial viability faster than the supply price presented in the government's hydrogen roadmap." Moon Kyungwon, a researcher at Meritz Securities, evaluated, "Although leading domestic conglomerates have announced hydrogen production plans, Korea Gas Corporation's competitiveness stands out among them in terms of technology and similarity to existing businesses."

Reflecting these positive situations, securities firms have also raised their target prices for Korea Gas Corporation one after another. Shinhan Financial Investment raised the target price to 37,000 KRW, up 12% from before; Mirae Asset Daewoo raised it from 28,000 KRW to 30,000 KRW; Korea Investment & Securities raised it from 36,000 KRW to 43,000 KRW; and KTB Investment & Securities raised it from 35,000 KRW to 40,000 KRW.