[Click eStock] "Taekwang, Effects of High Oil Prices and High Exchange Rates... Beginning of Structural Growth"

[Asia Economy Reporter Ji Yeon-jin] Hyundai Motor Securities forecasted on the 20th that Taekwang's quarterly orders are increasing, and the order momentum will grow as the Middle East's petrochemical plant project orders increase.

Minjeong Kwak, a researcher at Hyundai Motor Securities, stated, "The price-to-book ratio (PBR) based on next year is 0.9 times, undervalued compared to the average PBR of 2 during the past boom period in 2005," adding, "We believe it is the beginning of a period of structural growth."

Taekwang's sales for the third quarter of this year are expected to increase by 11.1% year-on-year to 54.7 billion KRW, and operating profit is expected to rise by 86.2% to 9.7 billion KRW. However, these results represent decreases of 3.2% and 18.5%, respectively, compared to the previous quarter. Sales are expected to continue increasing due to rising deliveries from increased orders, but the third quarter is generally expected to see a slight decline compared to the previous quarter due to reduced working days caused by holidays.

Researcher Kwak explained, "Globally, a boom in petrochemical plant construction is emerging to meet the increased demand for plastics caused by COVID-19, and LNG liquefaction plant projects and gas field developments are taking place due to the Russia-Ukraine war," adding, "Furthermore, the 2050 Net Zero policy requires investments in hydrogen plants and bio-refineries."

With oil prices remaining above $80, Middle Eastern countries are earning significant profits, which, according to analysis, are leading to new investments such as smart city projects like Saudi Arabia's Neom City construction, Qatar project investments, and Kuwait's construction of the world's largest petrochemical center.

Researcher Kwak forecasted, "Taekwang is expected to record new orders of around 80 billion KRW per quarter in 2023, with order growth in the Middle East region expected to accelerate," adding, "Sustained high exchange rates will also act as a positive factor for performance improvement."