[Click eStock] Kumho Petrochemical, Spark of Hope from Q4... Also Attractive for Dividends

[Asia Economy Reporter Lee Seon-ae] KB Securities forecasted a profitability rebound for Kumho Petrochemical starting from the 4th quarter on the 6th. They also judged that the high dividend yield towards the end of the year would attract attention. However, they stated that quarterly profit declines are inevitable from the 2nd quarter to the 4th quarter, and the target stock price is lowered by 6.6% to 340,000 KRW. The investment opinion was maintained as 'Buy'.

Researcher Baek Young-chan of KB Securities explained, "Due to the rise in raw material prices and the expected decline in NB latex prices, the 2022 net income attributable to controlling shareholders is lowered by 6.0% compared to the previous estimate, and quarterly profit declines are inevitable until the 4th quarter. However, from the 4th quarter, a profitability rebound in the synthetic rubber business is expected due to the decline in raw material (BD: butadiene) prices."

The 3rd quarter sales and operating profit are expected to be 2.1533 trillion KRW (+81.2% YoY, -2.1% QoQ) and 572.7 billion KRW (+168% YoY, -24.0% QoQ), respectively, indicating a profit decline compared to the 2nd quarter, but they are expected to meet the consensus (operating profit of 583.9 billion KRW as of August 31, FnGuide).

The 2nd quarter performance was very high, which is a burden on quarterly results. However, a small hope seems to revive from the 4th quarter. In the second half of the year, with increased new installations of naphtha crackers in China and other regions, BD (butadiene) production is also expected to expand. The expansion of BD production is likely to lead to a decline in BD prices from the 4th quarter. On the other hand, with the expected increase in new car sales in the first half of 2022, demand for general-purpose rubber for tires is expected to rise again. The spread for general-purpose rubber is judged to rise again from the 4th quarter.

Researcher Baek emphasized, "It is also necessary to pay attention to the possibility of Kumho Petrochemical strengthening its shareholder return policy," adding, "The expected dividend per share for 2021 is 12,000 KRW, and the expected dividend yield based on the current stock price is 6.3%."