[Click eStock] DK Lock, Benefiting from Yeongilman Oil Drilling Fitting Valve

Hana Securities analyzed on the 10th that DK Lock is expected to benefit as a fitting valve company due to oil drilling in Yeongilman, Pohang, Gyeongbuk. No investment opinion or target price was presented.

DK Lock, established in 1986, is a manufacturer of fitting valves applied in industries such as petrochemicals, offshore plants, semiconductors, and shipbuilding. During the down cycle of the shipbuilding industry, it expanded its petrochemical business and secured global leading petrochemical upstream and downstream companies such as ExxonMobil, Dow Chemical, and Marathon Petroleum as clients.

On the 7th of this month, details about the possibility of oil deposits in Yeongilman were specified through an interview with Dr. Abreu of Actgeo and the Korea National Oil Corporation. It is expected that up to 14 billion barrels of oil and gas are deposited. This corresponds to about 4 years’ worth of crude oil and about 29 years’ worth of gas based on domestic demand.

Researcher Cho Jeong-hyun of Hana Securities said, "According to media reports, the first exploratory drilling is expected to start in December this year, and the entire drilling period is projected to take about 1.5 years," adding, "Therefore, it is necessary to pay attention to fitting valve companies that are expected to benefit from the installation of oil drilling equipment and the construction of basic infrastructure, including shipbuilding and construction companies." He continued, "DK Lock is currently expanding sales toward oil and gas compared to competitors with a high proportion of shipbuilding sales, so it is a time to pay attention."

He said, "Oil and gas drilling and development work require infrastructure facilities such as drilling equipment, pipelines, and wellheads," and added, "DK Lock manufactures ‘process valves’ composed of pipes, flanges, and valve bodies, so it is judged that it can supply key components for oil development processes."

Hana Securities forecasted that DK Lock’s sales and operating profit will increase by 16.6% and 8.4% year-on-year to 130 billion KRW and 13 billion KRW, respectively, this year. Researcher Cho explained, "Since the overhang issue was resolved last November, the valuation burden is considered limited," and "additional upside potential can be expected depending on the progress of the Yeongilman drilling project in the second half of this year."