IBK Securities analyzed that while UNID's operating profit for the fourth quarter of last year fell short of market expectations, the activation of the China IChang project this year and a rebound in the price of potassium chloride are expected to positively impact sales growth. It maintained a target price of 100,000 won and an investment opinion of 'buy.' The closing price of UNID on the previous trading day was 65,300 won.
UNID's operating profit for the fourth quarter of last year was 10.1 billion won, a decrease of 50.6% compared to the previous quarter, significantly below the market expectation of 18.5 billion won. While the strong market conditions for its main product lines continued, the costs associated with one-off and regular maintenance were reflected.
Domestic chemical operating profit was 5.6 billion won, a decrease of 62.4% compared to the previous quarter. Despite favorable exchange rate effects due to falling shipping costs and export stocks, approximately 2 billion won in performance bonuses from headquarters were reflected, and the negative impact of annual maintenance carried out over two weeks since mid-October last year and increased electricity costs (approximately 2 billion won) affected the results.
China's chemical operating profit was 4.1 billion won, a decrease of 19.6% compared to the previous quarter. Lee Dong-wook, a researcher at IBK Securities, noted, "While there was a seasonal peak effect in the chlorine sector, the subsidiary UJC in China underwent regular maintenance in early October," elaborating that "UHC incurred some initial operating costs (approximately 2 billion won) during its trial operation, and the CPs plant also reported a deficit of about 3 billion won due to tests of new products."
From the first quarter of this year, the number one project in China IChang is expected to commence full operations. It has been in the testing phase since January this year. The researcher emphasized, "The production capacity of potassium hydroxide will increase by 12% (approximately 88,000 tons) compared to the existing capacity, maintaining its status as the world's largest potassium hydroxide producer." Additionally, UNID has diversified its potassium salt product portfolio by expanding its capacity for hard potassium carbonate by 52,000 tons.
This year, the price increase of potassium chloride is expected to lead to a rise in product prices. The researcher indicated, "Belarus, a major exporter of potassium chloride, plans to reduce its potassium chloride exports by approximately 1 million tons in the first half of this year, and production has been partially halted in Laos due to sinkhole issues," adding, "The imposition of a 25% tariff on Canadian products by the United States could further drive the rise in offshoring potassium chloride prices."
He further stated, "This is likely to lead to an increase in the prices of the company's products due to the rise in raw material prices."