[Click eStock] "SKC 3Q Operating Profit Expected at 144 Billion Won... Up 174% YoY"

Strong Performance Continues in Chemical Sector... Copper Foil Sales Also Increase
Actively Promoting New Businesses Such as Biodegradable LIMEX

[Asia Economy Reporter Minwoo Lee] SKC is expected to achieve strong earnings in the third quarter of this year, surpassing market consensus. While high profitability in the chemical sector is maintained, the secondary battery materials sector, including copper foil, is also projected to perform well.

On the 21st, Kiwoom Securities forecast that SKC will record consolidated sales of 887 billion KRW and operating profit of 144 billion KRW in the third quarter of this year. This represents a 31.2% increase in sales and a 173.9% increase in operating profit compared to the same period last year. The operating profit is also expected to exceed the recently raised consensus of 130 billion KRW. Researcher Dongwook Lee of Kiwoom Securities explained, "The chemical sector’s profits are expected to surpass the previous quarter’s surprise earnings, and the expansion effects in the copper foil and semiconductor materials sectors are also anticipated to contribute."

Operating profit in the fourth quarter is estimated to reach 123.9 billion KRW, a 113.4% increase year-on-year, despite some seasonal downturn effects. Lee said, "Due to power shortages, the operating rate of China’s propylene oxide (PO) plant has declined, and the full-scale operation of the expanded dipropylene glycol (DPG) production has increased the proportion of high value-added products, continuing the strong performance in the chemical sector. Additionally, the resolution of major clients’ recall issues and expansion efforts are expected to further increase copper foil sales."

SKC is also aggressively pursuing new businesses. It has already established a joint venture, SK TBM GOSTONE, with the Japanese eco-friendly materials company TBM to produce biodegradable plastics. The joint venture’s product, biodegradable LIMEX, is a new material that mixes limestone with biodegradable resin. Lee analyzed, "Although demand for biodegradable materials has surged recently, market expansion has been limited due to prices being 2 to 3 times higher than virgin polymers. However, biodegradable LIMEX is estimated to have price competitiveness as it can utilize up to 80% limestone, which is abundantly available."

The joint venture plans to start operations next year and begin large-scale commercial production in 2023. It is also known that production capacity will be expanded to 1 million tons by 2030. Furthermore, SKC plans to produce more than 35,000 tons of pyrolysis oil in 2023 through a joint venture with Japan Environment Energy, a pyrolysis company capable of producing high-quality emulsions from waste plastics.

Against this backdrop, Kiwoom Securities maintained its 'Buy' rating and target price of 250,000 KRW for SKC. The closing price on the previous day was 166,500 KRW.