[Featured Stock] JC Chemical, Eco-Friendly Company with PER of 8 Times... Eco-Friendly Stocks Average 22 Times 'Significantly Undervalued'

[Asia Economy Reporter Hyungsoo Park] JC Chemical's stock price is on the rise. It appears that the analysis highlighting the stock's significant undervaluation compared to domestic listed companies related to eco-friendly sectors such as solar and wind power has influenced the stock price.

At 9:39 AM on the 13th, JC Chemical was trading at 7,020 KRW, up 5.09% from the previous day.

On the same day, Hyundong Lee, a researcher at NH Investment & Securities, described JC Chemical as "a company producing biodiesel and bio heavy oil," and explained, "We expect performance growth this year due to the increase in the mandatory biodiesel blending ratio."

He added, "The increase in power plant usage of bio heavy oil and the expected use of ship fuel following the implementation of IMO2020 are additional growth factors."

Biofuels refer to various natural oil components converted into liquid fuels similar to petroleum through physical and chemical processes. When used, they drastically reduce fine dust, nitrogen oxides, and sulfur oxides compared to conventional chemical fuels.

Biodiesel is used either mixed with diesel or as 100% pure fuel. In South Korea, a law mandating the blending of renewable energy fuels was passed in 2013, and since 2018, a mandatory blending ratio of 3.0% has been applied. The blending ratio is scheduled to increase to 3.5% starting July this year, and the biodiesel market is expected to grow by 17%.

The researcher stated, "In line with the global average mandatory blending ratio of 10%, South Korea plans to raise it to 5% by 2030," and predicted, "This will lead to structural growth."

Bio heavy oil is an eco-friendly fuel that can operate generators without desulfurization and denitrification facilities. It has been used in power plants since 2019. To respond to the rising renewable energy supply obligation ratio until 2023, JC Chemical completed its own storage and shipment facilities in December 2019.

Last year, JC Chemical sold approximately 140,000 kl of bio heavy oil, marking a 44% increase from the previous year and recording sales of 91.2 billion KRW. They are also conducting ship fuel tests following the implementation of IMO2020. If adopted by shipping and shipbuilding companies, there is potential for additional performance growth next year.

The researcher estimated, "This year, sales will reach 328.7 billion KRW and operating profit 26.7 billion KRW," analyzing that "these figures represent increases of 22.8% and 39.1%, respectively, compared to last year."

He evaluated, "Based on this year's expected performance, JC Chemical's price-to-earnings ratio (PER) is 7.8 times, the lowest level in the past five years," and added, "This is a significant undervaluation compared to the domestic eco-friendly companies' average PER of 22.0 times."