[Click eStock] Korea Gas Corporation to Shine Amid Rising Oil Prices and Interest Rates

[Asia Economy Reporter Hwang Junho] Korea Investment & Securities raised the target price of Korea Gas Corporation to 60,000 won on the 26th, stating that the company's performance this year will reach an all-time high due to geopolitical uncertainties and inflationary pressures.

Korea Investment & Securities expects Korea Gas Corporation to achieve record-high operating profits this year and next, supported by an increase in appropriate investment returns and improved profits from overseas projects.

This year's base tariff increased by 19% compared to the previous year due to an increase in working capital, and the investment return rate also rose by 40 basis points amid the rising interest rate trend. Additionally, the overseas resource development business turned around thanks to strong raw material prices. This performance improvement is expected to outweigh the burden of interest expenses from increased receivables and the impact of exchange rate rises. In particular, the new government's energy policy direction is anticipated to have a positive effect on electric power public enterprises.

Choi Go-woon, a researcher at Korea Investment & Securities, stated, "Korea Gas Corporation is recommended as the top pick in the utility sector due to the structural nature of profit improvement alongside LNG prices," adding, "We have raised our operating profit estimates for this year and next by 12% and 15%, respectively."

He continued, "A reevaluation of profit leverage not only in domestic regulated businesses but also in overseas resource development is necessary," analyzing, "The Australian Prelude project is expected to contribute the most to overall profit growth until next year, and a reversal of past impairment losses is also anticipated."