[Featured Stock] Regional Heating Corporation Hits Record High... Stirred by Profit Turnaround and Dividend Expectations

Operating Profit Surprises at 28.9 Billion KRW in Q3
Profitability Improves Due to Cost Reduction and Price Increase
Dividend Resumption Expected... Over 10% Anticipated

District Heating Corporation recorded a 52-week high for the first time in 5 months. The warmth of its performance appears to be reflected in the stock price as it succeeded in turning a profit in the third quarter.

As of 9:37 a.m. on the 26th, District Heating Corporation is trading at 54,900 KRW, up 2.81% (1,500 KRW) from the previous trading day. It surpassed 53,900 KRW recorded in June, marking the highest price within a year.

District Heating Corporation's consolidated sales for the third quarter decreased by 3.7% year-on-year to 585.1 billion KRW, while operating profit successfully turned positive. The operating profit was 28.9 billion KRW, an 'earnings surprise.'

The background for the successful turnaround to profit is due to the accounts receivable accounting method introduced in the fourth quarter of last year. In the third quarter of this year, 68.4 billion KRW was recognized as uncollected heat fees corresponding to the amount not received for raw material costs incurred from LNG procurement and others.

Lee Sangheon, a researcher at iM Securities, said, "As profitability improvement in the district heating business becomes visible due to cost reductions and price increases this year, it is expected that a certain level of annual net profit will be achieved, resulting in stable cash flow." He added, "Dividends, which were suspended for two years, are also expected to resume." District Heating Corporation follows the Ministry of Strategy and Finance's mid-term dividend payout ratio targets for government-invested institutions. The dividend payout ratios were set at 40.0% and 43% in 2020 and 2021, respectively. At the current stock price level, the dividend yield is expected to exceed 10%.