[Click eStock] "Korea Carbon, Profit Recovery Disappointing Despite Sales Growth"

Shinhan Investment Corp. maintained a target price of 15,000 KRW and a buy rating for Korea Carbon on the 4th, stating that despite sales growth, profit recovery remains disappointing.

Last year's Q4 consolidated results recorded sales of 202 billion KRW, operating profit of 500 million KRW, and an operating margin of 0.2%. Sales exceeded consensus by 41%, but operating profit fell short by 95%.

Sales expansion began in earnest due to a sharp increase in order backlog. Despite the fire impact, growth was faster than expected. Although new orders have passed their peak, the order backlog is expected to decline much later due to Qatar's second phase and Mozambique volumes. Operating profit was negatively affected by low proficiency due to increased new personnel, increased consumable costs from the fire, and losses from subsidiaries outside of operations.

Researcher Dongheon Lee of Shinhan Investment Corp. said, "Growth is secured until 2027, but the key is the speed of profit recovery."

Domestic shipbuilders' LNG ship order slots will be completed by 2027. Ship prices recently rose to 270 million USD per vessel. The global LNG ship order backlog surged to 339 vessels. Korea Carbon has also secured volumes through 2027. It shares the same direction as shipbuilders' LNG ship production. The fire's impact is limited as a quasi-monopolistic operator. It still shares the market with competitors. The average OPM for the 10 years before the fire was 9.1%. Due to LNG ship price increases and volume growth, it is expected to return to normal profit margins between 2024 and 2026. The key is the speed of profit recovery. The second half of this year, when new personnel stabilize and the fire impact ends, is expected to be the start of the full growth phase.

The target price of 15,000 KRW is maintained, and the EPS application period is changed from 2023?2025 to 2024?2025, but EPS growth is expected to be minimal due to slow profit recovery. The average PER of 17.8 times, applied to the two insulation material companies when past performance began to rise in 2006, was used.