Kumho Petrochemical is experiencing a surge of over 13% in its stock price, driven by expectations of improved earnings for the second quarter.
As of 2:15 PM on May 8, the company’s shares were trading at 149,200 won, up 17,400 won (13.20%) from the previous trading day, according to the Korea Exchange.
Analysts attribute the rise to a positive shift in investor sentiment following forecasts of a turnaround in earnings. Mirae Asset Securities raised its target price for Kumho Petrochemical from 144,000 won to 160,000 won.
Previously, the company reported disappointing first-quarter results due to a spike in the price of butadiene, a key raw material, amid ongoing conflicts in the Middle East. The first-quarter operating profit was 59.4 billion won, falling short of the consensus estimate of 67.4 billion won by 12%. The price of butadiene surged from around $1,300 per ton to $2,700, impacting profitability, while the pass-through to product prices was delayed.
However, analysts predict that starting in the second quarter, the increase in costs will be reflected in product prices, and raw material prices are stabilizing, leading to a significant improvement in earnings. The operating profit for the second quarter is expected to rise sharply to 112.2 billion won compared to the previous quarter, particularly with a notable recovery in profitability in the synthetic rubber sector.
The price of NB latex has surged since April, raising expectations for improved margins, while the synthetic resin and phenol sectors are also showing price rebounds due to supply shortages. These divisions may even turn profitable.
Lee Jin-ho, an analyst at Mirae Asset Securities, stated, "Since April, the increase in raw material prices has been fully passed on to product prices, and raw material prices have begun to stabilize. We expect to see a significant improvement in earnings in the second quarter."
Lee Jin-myung, an analyst at Shinhan Investment Corp., noted, "Despite the stock's underperformance in the sector, considering the heightened potential for a turnaround as a leading global NB latex producer, a reevaluation of the stock price is likely."
* This article has been translated by AI.
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