[Click e-Stock] "Kumho Petrochemical Poised to Benefit from Tariff Hikes on Chinese Products"

On July 18, Korea Investment & Securities forecasted that Kumho Petrochemical would see improved performance in the third quarter, driven by an improved supply-demand balance for synthetic rubber. The firm maintained its "Buy" investment rating and a target price of 170,000 won.

Korea Investment & Securities estimated Kumho Petrochemical's operating profit for the second quarter at 71 billion won, down 40% year-on-year and 9% below market expectations. However, on a first-half basis, including the first-quarter results, which were a positive surprise, the company assessed that performance was similar to last year.

Choi Gooun, a researcher at Korea Investment & Securities, stated, "Most business segments are experiencing declining profits and overall sluggishness," adding, "Among them, the synthetic rubber division is expected to see the largest drop in profit due to lagging effects."

However, the company regarded Kumho Petrochemical's weak performance in the second quarter as a temporary phenomenon.

Choi projected, "Operating profit in the third quarter is expected to increase by 39% quarter-on-quarter," explaining, "The uncertainty from tariff hikes and significant price volatility in the first half were the main factors, but the supply-demand structure for synthetic rubber is structurally improving."

He further explained, "Rather than focusing on additional trade dispute risks stemming from the United States, it is more important to pay attention to the potential benefits from tariff hikes on Chinese-made medical gloves."

Choi selected Kumho Petrochemical as the stock with the highest shareholder return appeal, citing its steady profits and shareholder-friendly initiatives such as treasury share cancellation.

He said, "Kumho Petrochemical maintains a shareholder return rate of 30-40%, including treasury share buybacks equivalent to 10-15% of net profit and dividends of 20-25%. The company plans to cancel 5% of its treasury shares, and even after that, more than 10% will remain," adding, "Concerns over profit decline in the second quarter have prevented the stock price from rising, which presents a buying opportunity. We maintain our Buy rating."