[Click eStock] "Kumho Petrochemical, Strong Rebound Expected in 1Q Earnings"

1Q Operating Profit Expected at 84.4 Billion KRW
...Up 746% from Previous Quarter

Kumho Petrochemical is expected to achieve operating profits in the mid-80 billion KRW range in the first quarter of this year, showing a significant improvement compared to the previous quarter.

On the 20th, IBK Investment & Securities maintained its 'Buy' rating and target price of 170,000 KRW for Kumho Petrochemical based on this outlook. The closing price on the previous day was 112,800 KRW.

IBK Investment & Securities forecasted that Kumho Petrochemical's first-quarter performance this year will significantly exceed expectations. Operating profit is estimated at 84.4 billion KRW, a 746.0% increase compared to the previous quarter. This surpasses the market consensus of 70.6 billion KRW by more than 10 billion KRW. The improvement is attributed to the elimination of one-time costs and solid performance across all business divisions.

In the synthetic rubber segment, operating profit is expected to reach 35 billion KRW, a 90.0% increase from the previous quarter. This is due to a positive lagging effect (profit from the time lag in raw material input) and rising synthetic rubber prices driven by Southeast Asian tire manufacturers expanding production capacity.

After several years of continuous expansion of high value-added synthetic resin (ABS) capacity in China, much of the expansion has been completed, and demand from the automotive, home appliance, and electronics sectors is expected to improve, leading synthetic resin to turn profitable compared to the previous quarter.

The phenol derivatives division is expected to reduce its operating loss to 10.2 billion KRW, narrowing the deficit compared to the previous quarter. This is due to increased sales volume in the first quarter following large-scale maintenance in the previous quarter and a slight improvement in supply and demand from capacity adjustments by regional companies.

Annual operating profit for this year is projected at 419 billion KRW, a 53.6% increase from the previous year, marking a return to a growth trend after three years. Lee Dong-wook, a researcher at IBK Investment & Securities, stated, "With China's 'Iguhwanxin' policy and the increased penetration of large-diameter tires driving overall demand, the tight supply of natural rubber will continue, synthetic rubber net increase will be limited, and raw material prices will stabilize due to new steam cracker capacity in the region. Additionally, increased sales of ABS compounding for Chinese automobiles and the operation of Kumho Mitsui Chemicals' expanded methylene diphenyl diisocyanate (MDI) capacity will boost profits."