[Click eStock] Daehan Yuhwa, Growth Momentum Reemerges

[Asia Economy Reporter Junho Hwang] Shinhan Financial Investment has maintained the target price for Daehan Petrochemical at 440,000 KRW. This target price reflects the concerns already priced into the stock due to the slowdown in the chemical sector, along with the expectation that the premium for growth businesses will be highlighted again.

Shinhan Financial Investment expects Daehan Petrochemical's operating profit for the second quarter of this year to reach 80.2 billion KRW, about 7% lower than the previous quarter. This is below the market expectation of 85 billion KRW. The steep rise in costs compared to the price increases of key products such as HDPE, PP, and MEG is analyzed to be an obstacle to securing profits.

Operating profit for the second half of the year is also expected to decrease by about 4% compared to the first half, to 160.3 billion KRW, and profitability is forecasted to slightly decline (-1.3%p). This is due to the supply burden caused by large-scale capacity expansions of key products HDPE and PP in China.

However, cost burden relief due to oil price stabilization and demand improvement from economic recovery can also be anticipated.

Jinmyung Lee, Senior Researcher at Shinhan Financial Investment, explained, "The operating profit of PE for separators, which holds the global number one market share, is expected to more than double compared to last year." He added, "Sales volume expansion is expected due to aggressive capacity expansions by major customers (SKIET, Changshin New Materials, etc.), and potential demand is also anticipated from LG Chem's entry into the separator market."