[Click eStock] "Global Oversupply Persists... Daehan Yuhwa Needs Patience Until the Bottom"

Operating Profit Expected at 96.3 Billion Won This Year... 51% Decrease YoY
Oversupply Continues Until First Half... Large-Scale Regular Maintenance Scheduled for Second Half

[Asia Economy Reporter Minwoo Lee] Daehan Petrochemical is expected to report a sluggish performance this year, with operating profit projected to be halved compared to last year. This is due to the petrochemical industry, which began to decline from mid-last year, expected to remain sluggish until the first half of this year due to oversupply.

On the 3rd, Yuanta Securities maintained a 'Hold' investment rating on Daehan Petrochemical for these reasons and lowered the target price by 15.4% to 220,000 KRW. The closing price on the previous trading day was 183,000 KRW.

Yuanta Securities forecast that the impact of the declining petrochemical market since mid-last year will continue until the first half of this year. Researcher Kyuwon Hwang of Yuanta Securities explained, "Due to China's power transmission restrictions and carbon emission regulations, demand for petrochemical products in the automotive, home appliances, construction, and textile sectors is expected to weaken, while global capacity expansion pressure continues. Following large-scale facilities in Q4 2021, 1.8 million tons from Shell in the U.S., 800,000 tons from HPCL in India, and 1.2 million tons from PetroChina in China are pending in the first half of this year."

Given this situation, the expected performance for this year is sales of 2.2944 trillion KRW and operating profit of 96.3 billion KRW. The operating profit estimate represents a 51% decrease compared to last year's 195.1 billion KRW. This is due to the anticipated oversupply in the petrochemical sector in the first half of the year and scheduled large-scale regular maintenance in the second half. However, polyethylene (PE) and polypropylene (PP) for secondary battery separators are estimated to continue growing at a rate of 20%.

Researcher Hwang stated, "There is a high possibility that the quarterly losses in petrochemicals seen in the first half of this year will recur. However, if global capacity expansion pressure eases from the second half, operating profit margins for pipe-use PE and PP could recover to 10% due to increased global infrastructure investment."