[Market Focus] Korea Petrochemical Surges on News of Third-Quarter Return to Profitability

As of 9:30 a.m. on October 16, the share price of Korea Petrochemical Ind. Co., Ltd. was up 9.53% from the previous day's closing, trading at 119,500 won on the Korea Exchange. This appears to be due to expectations that the company will return to profitability in the third quarter for the first time in two years.

Korea Petrochemical Ind. Co., Ltd. operates a Naphtha Cracking Center (NCC) with an annual production capacity of 900,000 tons, accounting for 7% of South Korea's total capacity of 12.6 million tons. Its main products include 650,000 tons of polyethylene (including 10,000 tons of high value-added separator-use PE) and 550,000 tons of polypropylene.

On this day, Hana Securities estimated that Korea Petrochemical Ind. Co., Ltd.'s operating profit for the third quarter would reach 23.2 billion won, marking a quarterly return to profit for the first time in about two years. The forecast also far exceeds the securities market consensus of 10.4 billion won. The company's unexpected strong performance is attributed to factors such as lower raw material input costs, a rise in the exchange rate, and reduced depreciation expenses. Hana Securities also projected that the company would post an operating profit of 28.5 billion won in the fourth quarter. The target share price was raised from 150,000 won to 170,000 won.

Yuanta Securities also pointed out that the profitability per ton of ethylene is gradually recovering due to restructuring in the petrochemical facilities of Korea, China, and Japan. In addition, Korea Petrochemical Ind. Co., Ltd. is expected to benefit not only from the consolidated performance of its LNG power generation subsidiary Hanju, in which it holds a 51% stake, but also from the possibility of establishing a 660,000-ton ethylene joint venture with Ulsan SK Geocentric during the petrochemical restructuring phase, based on surplus cash in the future. The target share price was maintained at 220,000 won.