[Click eStock] "Korea Carbon, Stable Order Volume... Target Price Maintained"

On the 25th, SK Securities maintained its buy rating and target price of 17,500 KRW for Korea Carbon, stating, "Based on stable order volumes, growth is expected due to production capacity expansion and stabilization of raw material prices." The previous day's closing price was 10,650 KRW.

On the same day, SK Securities analyst Han Seung-han said, "Korea Carbon's consolidated sales in the fourth quarter of last year are expected to increase by 37.5% year-on-year to 145.7 billion KRW," adding, "Operating profit is expected to rise by 20.2% to 7.3 billion KRW. However, due to outsourcing processing costs and expenses related to new business expansion, it is estimated to fall short of market expectations by 9.6 billion KRW."

Analyst Han noted, "The price of the key raw material methylene diphenyl diisocyanate (MDI) continued a slight downward trend," but pointed out, "The ongoing war between Russia and Ukraine has caused continuous increases in wood prices imported from Russia and Northern Europe, which has been the main factor driving cost increases."

He added, "As of the fourth quarter of last year, about 75% of the production capacity (CAPA) expansion has been completed. The remaining installations are expected to be completed in the first quarter of this year, leading to overall normalization of production processes throughout the year," explaining, "This volume exceeds the production capacity lost due to the fire at the Miryang plant in the first half of last year. It is estimated to secure insulation material production capacity equivalent to 30 vessels annually."

He said, "However, the order backlog for liquefied natural gas carriers (LNGC) at domestic shipyards is already full until 2027. It is appropriate to exclude revenue expansion from orders by Chinese shipyards," adding, "Outsourcing processing costs through competitors are expected to almost disappear from the first quarter, and from the second half of the year, performance improvement will continue due to stabilization of major raw material prices including MDI and an increase in the proportion of deliveries reflecting price hikes."

Regarding the possibility of delivery price increases, a conservative approach is necessary, as the rise in LNGC ship prices is unlikely to reach last year's levels. Analyst Han said, "There is sufficient basis for corporate value due to new business expansion and securing new revenue sources," and added, "Final investment decisions (FID) for liquefied natural gas (LNG) production projects in the North American region are expected to be made in earnest, and the three domestic shipbuilders are anticipated to secure orders for 50 to 60 LNGCs annually on average. Based on stable order volumes, we expect both quantitative and qualitative growth through production capacity expansion and stabilization of raw material prices."