[Click eStock] "Korea Carbon, Performance Improvement from Second Half... Target Price Up"

[Asia Economy Reporter Myung-Hwan Lee] Hana Securities announced on the 19th that it maintains a buy rating on Korea Carbon and raises the target price by 18.8% from the previous 16,000 KRW to 19,000 KRW. This is due to expectations of improved performance in the second half of the year, driven by the decline in major raw material prices and sales recovery.

Korea Carbon's sales in the second quarter of this year amounted to 71.6 billion KRW, down 32.7% compared to the same period last year. Hana Securities analyzed that despite a somewhat favorable KRW-USD exchange rate, sales decreased due to a time lag effect from reduced orders in 2020. However, it is expected that sales will recover again from the second half of this year. As of the end of the second quarter of 2022, the order backlog exceeds 1 trillion KRW, indicating that the company holds more than three years' worth of work.

Operating profit recorded 2.5 billion KRW, down 78.7% year-on-year. The analysis suggests that margins slightly decreased due to increased selling and administrative expenses burden as sales scale shrank. Hana Securities judged that considering the reduction in fixed cost burden with the recovery of scale, there is a high possibility of profit margin recovery in the second half. Pre-tax profit significantly increased to 10.4 billion KRW compared to the previous quarter, mainly due to recognition of purchase gains from the acquisition of a new corporation.

Hana Securities' analysis expects Korea Carbon to benefit in the mid-to-long term as demand for liquefied natural gas (LNG) carriers increases. Considering not only LNG projects in Qatar and Mozambique but also the overall demand increase due to changes in the global energy supply and demand balance, the LNG carrier order trend is likely to continue for the time being. Researcher Jae-Seon Yoo of Hana Securities stated, "As the length of the customer order backlog has increased, expectations for new orders can also grow," adding, "The benefits from industry improvement are expected to continue in the mid-to-long term."