[Click eStock] "Kumho Petrochemical Expected to Benefit from Raw Material Price Decline"

IBK Securities Report

On the 22nd, IBK Investment & Securities analyzed Kumho Petrochemical, expecting benefits from the decline in raw material prices. Accordingly, they maintained a 'Buy' investment rating and a target price of 184,000 KRW.

Lee Dong-wook, a researcher at IBK Investment & Securities, stated, "Kumho Petrochemical is expected to experience a positive spillover effect from the decline in raw material prices," adding, "Due to the increase in volume of basic feedstocks and intermediate products caused by capacity expansion from China's NCC (Naphtha Cracking Center), the price decline effect on Kumho Petrochemical's main raw materials will continue this year."

The researcher explained, "Therefore, downstream companies without crackers are likely to maintain their advantages this year as well," and noted, "For reference, IBK Investment & Securities estimates Kumho Petrochemical's annual external purchase volume of basic feedstocks and intermediate products at 2.5 to 3 million tons, so a price drop of 100 USD per ton would reduce raw material costs by 300 to 400 billion KRW annually. Last week, the domestic spot price of butadiene fell by more than 40% compared to early March."

He continued, "Demand in Kumho Petrochemical's key downstream industries, such as automobiles and tires, is expected to improve compared to last year," and predicted, "China is expected to see a carryover effect this year from last year's purchase tax reduction, while recovery is anticipated in the US, Europe, and emerging regions. Additionally, improvements in vehicle semiconductor supply will resolve the three-year supply disruptions, increasing accumulated pent-up demand since 2020."

He added, "The stock prices of Malaysia's top-tier glove manufacturers, Top Glove and Hartalega, have rebounded by about 70-80% compared to early March this year," emphasizing, "This is due to the withdrawal of new glove capacity expansions and inventory clearance by distributors, which has recently led to a rebound in Kumho Petrochemical's NB latex prices."