[Click eStock] "Korea Gas Corporation, Benefiting from Hydrogen Economy Amid Earnings Improvement"

[Asia Economy Reporter Ji Yeon-jin] Korea Investment & Securities announced on the 27th that it is raising the target price of Korea Gas Corporation by 16% to 50,000 KRW, reflecting expectations for a performance turnaround due to increases in oil prices and LNG fees, as well as its role in the hydrogen economy.

Choi Go-woon, a researcher at Korea Investment & Securities, stated, "Korea Gas Corporation's current stock price is at 0.47 times PBR (Price-to-Book Ratio). From an ESG (Environmental, Social, and Governance) perspective, as decarbonization becomes more important, doubts have arisen about the growth potential of overseas businesses, and the stock price no longer reflects the effects of rising oil prices as it used to." He added, "However, the hydrogen business serves as a stock momentum that can resolve the previous discount. Like LNG, Korea Gas Corporation, which can manage the hydrogen distribution value chain, is the most suitable entity to secure economies of scale."

Korea Gas Corporation's annual operating profit is expected to reach 1.2 trillion KRW, a 33% increase compared to the previous year. This is due to the normalization of overseas businesses supported by rising oil and LNG prices. Domestic regulated businesses are expected to improve performance due to increased working capital and interest rate hikes. Accordingly, the dividend yield is projected to recover to 3%.

Investment plans for the hydrogen business, a new growth driver, are expected to be concretized. This is why a reevaluation of Korea Gas Corporation's role is anticipated, as it has established the fastest direction toward eco-friendliness among electric power public enterprises. Although distrust in energy policies has led to a discount in the utility sector, Korea Gas Corporation is expected to differentiate itself because oil prices and interest rates, which are more important to performance, have rebounded, and benefits from the growth of the hydrogen industry are anticipated.

Researcher Choi said, "Korea Gas Corporation is stably guaranteed an appropriate investment return. Because its fee structure is a B2B business model rather than targeting general consumers, it is relatively free from government interference." He added, "LNG is an energy source that can complement renewable energy during the energy transition process, so short-term performance is more influenced by the direction of oil prices than by policy risks."