[Click eStock] "DL, Overwhelming Profitability in Petrochemical Sector"

On the 3rd, IBK Investment & Securities evaluated that "DL, the holding company of DL Group, is showing overwhelmingly superior profitability in the petrochemical sector compared to competitors despite the sluggishness in the construction sector."

DL recently announced that it recorded an operating profit of 172.3 billion KRW in the first quarter of this year. This figure represents a 124.6% increase compared to the fourth quarter of last year and significantly exceeds the market consensus of 104.5 billion KRW.

Lee Dong-wook, a researcher at IBK Investment & Securities, stated in a report on the same day, "The operating profit of the chemical division (DL Chemical) was 82.8 billion KRW, a 35.3% increase from the previous quarter," adding, "This recorded an overwhelming operating profit margin of 16.5% compared to competitors."

He explained DL's excellent profitability by saying, "Although the spread (margin) of polyethylene (PE) products remains low, this is due to the effect of the 20,000-ton expansion of the cash cow polybutene (PB) and the strong sales of polyolefin elastomer (POE) products resulting from the rapid increase in production of N-type solar modules in China."

Furthermore, he added, "DL Chemical's U.S. subsidiary, Crayton, also showed a profit of 55.6 billion KRW with an increase in operating profit of 100 billion KRW," and explained, "The performance of the polymer division improved due to the rise in butadiene prices in Europe and the U.S., and overall volume increased in the chemical division as well."

On the other hand, he diagnosed, "The operating profit of the energy division decreased by 21% to 39.2 billion KRW, and Cariflex, the world's number one isoprene latex company and a U.S. subsidiary of DL Chemical, saw its operating profit drop by 69.8% due to inventory adjustments by customers."

He forecasted, "From the second quarter onward, as the spread of PE products improves, combined with the effects of PB expansion, POE line conversion, and Crayton's performance normalization, results will further improve," and added, "With improved cash flow, DL will repay borrowings and transition to a virtuous cycle structure by improving its financial structure."