[Click eStock] "Samchully, Rapid Improvement in Power Generation Sector Performance"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 120,000 KRW for Samchully on the 18th. This is based on the assessment that sales volume is steadily improving due to the normalization of fuel cell facility operations and capacity expansion.

In the third quarter, Samchully's sales reached 642.7 billion KRW, a 23.9% increase compared to the same period last year. Although sales volume of residential and general-use city gas decreased, overall sales volume improved due to increases in industrial and fuel cell usage. In the power generation sector, while the increase in electricity sales volume was limited, the rise in System Marginal Price (SMP) led to growth in scale.

Operating profit recorded 4.1 billion KRW, turning positive compared to the previous year. City gas saw a reduction in losses due to retail price hikes. Power generation profits improved thanks to the rise in SMP and increased electricity sales volume. Considering that operations were restricted for about three weeks due to the construction of the Sinansan Line transmission line, it is interpreted that a favorable environment has been created for private power producers. Researcher Jaeseon Yoo stated, “An upward trend in SMP is expected until the first half of next year, so improvements in the power generation sector's profits can be confirmed for the time being,” adding, “Non-operating income improved due to the sale of investment real estate, and pre-tax profit recorded a surplus compared to the previous year.”

Despite the decrease in order backlog for Samchully ES and the increase in renewable energy obligation (RPS) and ETS costs due to higher power generation, there is a high possibility of achieving the highest-ever operating profit. Although pre-tax profit fluctuations have been significant for a considerable period, this year is expected to see the highest net profit since 2009, with a low likelihood of large one-time expenses. Finally, Researcher Yoo added, “What is necessary for stock price revaluation is diversification of the portfolio through new businesses and shareholder return policies.”