[Click eStock] Daehan Yuhwa, Target Price Down Due to Poor Market Conditions... "Investor Sentiment to Recover if China Changes COVID Policy"

[Asia Economy Reporter Ji Yeon-jin] Samsung Securities announced on the 9th that it is lowering the target price for Daehan Chemical from the previous 240,000 KRW to 190,000 KRW, citing a downgrade in this year's earnings forecast due to sluggish industry conditions.

Daehan Chemical posted an operating loss of 2.2 billion KRW in the first quarter of this year, continuing its deficit and falling short of the market expectation of 3 billion KRW in operating profit. International

The spread weakness caused by the sharp rise in crude oil prices is cited as the reason for the loss.

Operating profit for the second quarter of this year is expected to turn positive at 24 billion KRW. However, the operating margin is forecasted to be 3.2%, indicating that meaningful profitability improvement will be difficult.

The chemical market in the first quarter of this year anticipated demand recovery following the shift in China's quarantine policies after the Beijing Winter Olympics, but rather, the intensified lockdown measures deepened the weakness in Asian chemical demand after March. Chinese authorities announced the postponement of the Hangzhou Asian Games, originally scheduled for September this year, signaling the continuation of the zero-COVID policy. However, if a shift in quarantine policies occurs in the future, a meaningful recovery in Asian chemical demand is expected.

Hyun-ryeol Cho, a researcher at Samsung Securities, stated, "It is regrettable that the sluggish industry conditions persist, but the extremely low valuation is a consolation," adding, "This year's expected price-to-earnings ratio (PER) and price-to-book ratio (PBR) are 8.9 times and 0.43 times, respectively, with the PBR being the lowest since the COVID-19 period. Therefore, if a policy shift in China is announced, short-term investor sentiment could quickly recover."