[Click eStock] Isu Chemical Continues Earnings Growth Trend This Year

[Asia Economy Reporter Lee Seon-ae] Kiwoom Securities announced on the 6th that it has newly included Isu Chemical in its coverage with a buy rating and a target price of 21,000 KRW.

Researcher Lee Dong-wook of Kiwoom Securities explained, "The reason for the buy rating is that while the performance of the construction and pharmaceutical sectors is stabilizing, the core petrochemical division is in a profit improvement cycle, and the proportion of specialty products is continuously expanding."

Isu Chemical's operating profit for the fourth quarter of last year is expected to be 25.4 billion KRW, an increase of 93.7 billion KRW compared to the same period last year. Despite some expected performance bonuses, the deferral of regular maintenance is expected to limit damage to petrochemical volumes, and the favorable exchange rate effect for export-oriented companies continues. Due to restrictions on new capacity expansion, the solid profitability of the main product LAB is maintained, and strong demand for front-end product groups such as Rubber, Latex, acrylic derivatives, PMMA, ABS, and PS is supporting the high margin of Heavy Mercaptans like TDM. IPA's spread has recently rebounded due to a sharp drop in the raw material acetone price. Additionally, the construction sector is expected to turn profitable compared to the previous quarter due to the removal of demolition costs for new housing projects (Uijeongbu Jangam, Incheon Lotte Uram) that occurred in the previous quarter.

In particular, the petrochemical division's operating profit is expected to break the company's record high again this year following last year. The tight supply and demand of the main product LAB is expected to continue this year.

Improvement in the pharmaceutical division, Isu Abxis, is also anticipated. Isu Abxis has been pursuing contract manufacturing of the Russian COVID-19 vaccine SPUTNIK since the first half of last year. They are newly expanding 1000L production equipment, enabling an annual production capacity of 50 million doses. Sales contribution is expected to vary depending on volume secured, but if the vaccine is effective against the Omicron variant or volume is smoothly secured, growth of 2 to 4 times the current pharmaceutical division sales is possible.