[Special Stock] Chairman's Resignation Rule?… Kumho Petrochemical's Value Soars

[Asia Economy Reporter Ji Yeon-jin] The value of Kumho Petrochemical is soaring. Following first-quarter results that exceeded expectations this year, the announcement by Chairman Park Chan-gu that he will step down from the front lines of management has raised hopes that the company will transform into a more shareholder-friendly enterprise.

As of 10:45 a.m. on the 6th, Kumho Petrochemical was trading at 290,000 KRW, up 25,000 KRW (7.41%) from the previous trading day. The stock, which started up 0.93% (2,500 KRW), continued to gain momentum throughout the session, soaring to 295,000 KRW and setting a new 52-week high.

The upward momentum was driven by earnings. Kumho Petrochemical’s first-quarter operating profit, announced on the 4th, was 612.5 billion KRW, a 360% increase compared to the same period last year. This figure represents 83% of last year’s annual profit and marks the highest quarterly profit since the company’s founding.

Hana Financial Investment and Kiwoom Securities raised their target prices for Kumho Petrochemical to 600,000 KRW, more than double the current stock price. DB Financial Investment (460,000 KRW), Daishin Securities (450,000 KRW), Hyundai Motor Securities (440,000 KRW), and NH Investment & Securities (390,000 KRW) also simultaneously raised their target prices. Hanwha Investment & Securities newly set a target price of 350,000 KRW, while Ebest Investment & Securities maintained a target price of 350,000 KRW. Anna Lee, a researcher at Ebest Investment & Securities, commented, "There is a lack of growth momentum after the market peak-out."

Besides earnings, Chairman Park Chan-gu’s announcement to resign as CEO also acted as a momentum driver. Yoon Jae-sung, a researcher at Hana Financial Investment, said, "Through Chairman Park’s resignation, the company hinted at many possibilities for change," adding, "There is potential for governance changes, new business opportunities based on large net cash, additional dividend increases, and share buybacks, all of which could enhance corporate value."

Previously, Namyang Dairy Products saw its stock surge 9.5% in one day immediately after Chairman Hong Won-sik announced his resignation at a press conference on the morning of the 4th. Namyang’s stock had initially surged after announcing research results on the 13th of last month showing that its probiotic product ‘Bulgari’s’ had COVID-19 suppression effects but then continued to decline. The stock recovered after Chairman Hong took responsibility and stepped down.

Meanwhile, Kumho Petrochemical was embroiled in a management dispute ahead of its regular shareholders’ meeting in March when Park Cheol-wan, the largest individual shareholder and nephew of Chairman Park, made a shareholder proposal. After experiencing sharp stock price fluctuations, the stock has recently trended upward amid expectations of economic recovery. Compared to the beginning of the year, the stock price is up 78.81%.