[Market Focus] Daehan Petrochemical Rises on Continued Earnings Improvement Expectations in Q3

As of 10:55 a.m. on November 12, shares of Daehan Petrochemical were trading at 154,800 won on the Korea Exchange, up 12.99% from the previous closing price. This appears to be due to expectations that the company's earnings improvement will continue following its return to profitability in the third quarter.

Exterior view of Daehan Petrochemical factory

Daehan Petrochemical operates a Naphtha Cracking Center (NCC) with an annual production capacity of 900,000 tons of ethylene and related products, accounting for 7% of 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 membrane-grade PE) and 550,000 tons of polypropylene.

Previously, on October 31, Daehan Petrochemical announced its preliminary consolidated financial results for the third quarter. The company posted sales of 909.9 billion won and an operating profit of 42.8 billion won, successfully returning to profitability for the first time in over two years. Notably, operating profit far exceeded the securities market consensus of 10.4 billion won. The company's strong performance is attributed to factors such as the use of low-cost raw materials, a rise in exchange rates, and reduced depreciation expenses.

The earnings improvement is expected to continue next year. Lee Chungjae, an analyst at Korea Investment & Securities, explained, "The rise in natural gas prices, driven by increased U.S. LNG exports and data center construction, will negatively impact the profitability of U.S. ECC and PDH operators. As a result, lower operating rates among North American natural gas chemical companies will reduce PE and PP supply, serving as a catalyst for Daehan Petrochemical's earnings growth."

In addition, the company's 51%-owned LNG power generation subsidiary, Hanju, will begin supplying the Ulsan petrochemical complex next year, which is another positive factor. Hanju's performance has been reflected in consolidated results since May. Hanju supplies electricity (142MW), steam (1,142 tons per hour), and industrial water (170,000 tons per day) to the Ulsan area.