[Click eStock] "Kumho Petrochemical Holds Tight Supply Portfolio... Undervalued Appeal Highlighted"

[Asia Economy Reporter Park Jihwan] NH Investment & Securities emphasized on the 14th that although the overall profitability of the petrochemical industry declined in the second half of the year, Kumho Petrochemical holds a portfolio centered on supply-tight items, resulting in relatively high profitability and an expected high dividend yield at year-end. They maintained a buy rating and a target price of 350,000 KRW.

Hwang Yusik, a researcher at NH Investment & Securities, stated, "Although the spreads of many general-purpose petrochemical products turned weak in the second half, the spreads of major held items (BPA, NB-Latex, ABS, Epoxy) remain strong due to tight supply and demand." The general-purpose items with tight supply and demand within the petrochemical industry include BPA, PC, Epoxy, ABS, PVC, EVA/LDPE, etc. Conversely, items expected to have supply increases exceeding demand increases in the second half include HDPE, PP, MEG, P-X, PTA, among others.

Operating profit for the third quarter is expected to reach 611.7 billion KRW, a 186.1% increase compared to the previous year. It is forecasted to maintain a very high level comparable to the usual annual operating profit. Researcher Hwang said, "In the phenol derivatives business (Kumho P&B Chemicals), operating profit is expected to increase compared to the previous quarter due to tight supply and demand in the BPA and phenol markets." He added, "In synthetic rubber, supply and demand for items such as NB-Latex and SBR will remain tight, but profitability will slightly decline due to rising raw material (BD) prices."

There is also analysis highlighting the need to pay attention to the high year-end dividend yield and the possibility of a resurgence of management disputes before next year's regular shareholders' meeting. During the previous management dispute, the company promised to expand dividends to enhance shareholder value. Based on estimated performance, the individual dividend payout ratio is expected to be raised to 20-25%, with a projected dividend per share of around 11,000 KRW.

Researcher Hwang emphasized, "Considering the portfolio centered on supply-tight items within the industry and the potential for increased sales volume through production facility expansion, the current stock price is judged to be undervalued."