[Click e-Stock] "Korea Petrochemical Ind. Co. to Return to Petrochemical Profitability Next Year... Target Price Maintained at 210,000 Won"

On December 29, Korea Investment & Securities maintained its "Buy" investment rating and a target price of 210,000 won for Korea Petrochemical Ind. Co., predicting that the company's petrochemical business will return to profitability next year.

Lee Chungjae, a researcher at Korea Investment & Securities, stated in a report titled "Basis for Improved Profitability in Korea's Petrochemical Industry in 2026" released on this day, "The United States, Japan, Europe, and Korea have all begun restructuring their petrochemical facilities."

First, Lee estimated that while the planned global ethylene capacity expansion for next year is around 9 million tons, the actual increase in production will be limited to less than 4 to 4.5 million tons. He explained, "On the surface, there are concerns about a deepening supply glut, but the key is the 'actual increase in production.' Since the start-up of major facilities is concentrated in the second half of the year, especially in the fourth quarter, the actual increase in production will be about half the planned expansion." He added, "Taking this into account, the actual oversupply rate in 2026 will improve compared to 2025."

In addition, Taiwan's Nan Ya Plastics has already announced the indefinite suspension of its MEG facilities starting January next year due to deteriorating profitability. Lee noted, "Despite growing global demand, petrochemical companies worldwide-except those in the Middle East-are experiencing declining profitability," adding, "This is an abnormal situation and cannot be sustained for long."

He also highlighted the beginning of petrochemical facility restructuring in major countries, mentioning the permanent shutdown of facilities by Westlake in the United States, the integration of facilities by Mitsui and Sumitomo in Japan, and the closure of facilities by Ineos in Europe. He stated, "If the Russia-Ukraine war ends, there is a strong possibility of further declines in international oil prices," and predicted, "Korea's petrochemical industry will see significant improvement in 2026." He explained that the recovery in cost competitiveness due to falling oil prices and rising natural gas prices, as well as supply reductions in all regions except the Middle East, are the main drivers of this improvement.

Accordingly, Lee forecasted, "Korea Petrochemical Ind. Co.'s petrochemical business will also return to profitability next year." The operating profit of the petrochemical division is expected to swing from an 8 billion won loss this year to a 123 billion won profit next year. On a quarterly basis, operating profit is estimated at 20 billion won in the first quarter, 28 billion won in the second quarter, 37 billion won in the third quarter, and 38 billion won in the fourth quarter. The company's total operating profit in 2026 is projected to reach 216 billion won.