[Click eStock] "Korea Gas Corporation, Expecting Performance Improvement This Year"

Shinyoung Securities Report

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating and a target price of 60,000 KRW for Korea Gas Corporation on the 27th. This is based on the expectation of improved performance considering strong energy prices, planned tariff increases, and the normal operation of Prelude.

Korea Gas Corporation is expected to record Q1 sales of 14.1 trillion KRW, an 82.9% increase year-on-year, and operating profit of 816.7 billion KRW, a 6.8% increase. Deokmin Kwon, a researcher at Shin Young Securities, said, “Although operations were suspended until Q1 due to the fire at Australia's Prelude, depreciation expenses continued to occur, negatively impacting results.”

Annual sales are estimated to increase by 25.8% year-on-year to 35 trillion KRW, and operating profit is expected to rise 4.2% to 1.5 trillion KRW. The increase in working capital is likely to lead to a base rise in tariffs, so appropriate investment returns are expected to increase compared to the previous year. The return on equity is predicted to be similar to last year as interest rates rise while beta decreases.

Australia's Prelude is scheduled to begin full-scale operations from Q2. It is expected to receive one cargo each in Q2 and Q3. Researcher Kwon explained, “Since the likelihood of a sharp drop in LNG prices is low, performance improvement is expected,” adding, “Although accounts receivable are expected to increase by about 2.5 trillion KRW, if the tariff increase proceeds as planned this year, gradual recovery of receivables is likely.”