NH Investment & Securities "Rising Palm Oil Prices and Biodiesel Blending Mandate Ratio to Contribute to Earnings in Q2"
[Asia Economy Reporter Gong Byung-sun] It has been revealed that eco-friendly policies drove JC Chemical's record-breaking performance in the first quarter of this year. NH Investment & Securities forecasted that the rise in palm oil prices and the increase in the biodiesel blending mandate ratio will continue to drive performance growth in the second quarter. No investment opinion or target price was provided.
According to NH Investment & Securities on the 14th, the expansion of the Renewable Portfolio Standard (RPS) has increased sales in JC Chemical's bio-refining business division. The bio-refining division's sales in the first quarter of this year reached 40.4 billion KRW, a 92% increase compared to the same period last year. The bio-refining sector is expected to benefit from future government policies as it can reduce fine dust, nitrogen oxides, and sulfur oxides compared to bunker fuel. It also contributed to the overall growth in company performance. JC Chemical's total sales in the first quarter were 79.8 billion KRW, a 30% increase year-on-year. Operating profit also recorded a record high at 8.7 billion KRW, up 95% from the same period last year.
The operating profit margin was 10.9%, up 3.7 percentage points from last year's 7.2%. Hyun-dong Lee, a researcher at NH Investment & Securities, explained, "The increase in product selling prices and the rise in sales offset fixed costs," adding, "By utilizing the self-completed storage and shipping facilities from last year, selling and administrative expenses decreased by 1 billion KRW compared to the same period last year, so the operating profit margin is expected to improve in the second quarter as well."
The biodiesel division is also expected to rebound. Sales in the biodiesel division in the first quarter were 30.2 billion KRW, a 4% decrease compared to the same period last year. From the second half of the year, the blending mandate ratio is scheduled to increase from the existing 3% to 3.5%. The researcher said, "The biodiesel market is expected to grow by 17%," and added, "JC Chemical's biodiesel division sales are also expected to grow to 135.4 billion KRW this year."
Palm oil prices will also rise from the second quarter. Currently, the price of palm oil is $1,168 per 1,000 kg (approximately 1.32 million KRW), marking an all-time high. The researcher explained, "From the second quarter, the rise in palm oil prices and the effect of capacity expansion are expected to be fully reflected in the performance."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
