[Click eStock] "Korea Gas Corporation, Beneficiary of Rising Oil Prices and Interest Rates"

Due to the December fire at an Australian gas field, 4Q performance showed slight decline

Korea Gas Corporation Headquarters Building Exterior View

[Asia Economy Reporter Minwoo Lee] It is expected that the performance of Korea Gas Corporation will be favorably influenced by inflation-related indicators such as rising oil prices and interest rates. However, the results for the fourth quarter of last year are likely to slightly fall short of expectations due to temporary setbacks caused by incidents such as the fire at the Prelude gas field in Australia.

On the 11th, Hana Financial Investment maintained its target price for Korea Gas Corporation at 62,000 KRW and its investment rating as 'Buy.' The closing price on the previous day was 37,150 KRW.

For the fourth quarter of last year, consolidated sales are expected to reach 11.0897 trillion KRW, with an operating profit of 354.1 billion KRW. This represents increases of 106.1% and 36.1%, respectively, compared to the same period the previous year. The increase in gas sales volume and rising oil prices are expected to boost sales in the natural gas wholesale business and overseas operations. However, operating profit is estimated to fall short of the market consensus of 434.6 billion KRW.

Yoo Jae-sun, a researcher at Hana Financial Investment, explained, "Overseas operations are expected to see a decline in profits compared to the previous quarter due to the suspension of operations following the fire at the Prelude gas field in Australia in December last year. Operations are scheduled to resume in mid to late next month, and considering the recent sustained strength in Asian liquefied natural gas (LNG) prices, performance is expected to improve after normalization."

The revision of the Natural Gas Supply Regulations, which from this year reflects the settlement price for the recovery of unpaid city gas fees in gas charges, also helps reduce the burden. On December 27 last year, a new tariff table was added to the annex of the revised Natural Gas Supply Regulations. The settlement price for raw material costs for residential use will be applied as 1.23 KRW per megajoule (MJ, unit of gas heat content) in May, 1.90 KRW/MJ in July, and 2.30 KRW/MJ in October.

Researcher Yoo forecasted, "Considering the increase in gas demand during the peak season, the accumulated amount of unpaid fees as of the end of the first quarter this year will increase significantly, but the burden of increased unpaid fees will be alleviated by additional cash flow generated after reflecting the settlement price."