LS SECURITIES evaluated on the 11th that Kumho Petrochemical's performance was likely weak due to sluggish demand in the second quarter (April to June) of this year, though the value of its treasury stocks could change. LS SECURITIES has raised its target stock price for Kumho Petrochemical from 127,000 won to 166,000 won and upgraded its investment opinion to 'buy.'
Researcher Jung Gyeong-hee from LS SECURITIES estimated that Kumho Petrochemical recorded sales of 1.6841 trillion won and an operating profit of 64 billion won in the second quarter, which are reductions of 10.9% and 46.3%, respectively, compared to the same period last year.
Researcher Jung noted, "The rubber institutional sector likely experienced a decline in profitability due to the volatility of butadiene and weak demand," adding, "The latex market was also weak as the pre-purchased quantity before the imposition of tariffs in the U.S. affected prices throughout the first half of the year." He continued, saying, "The specialty synthetic rubber (EPDM) business also likely saw reduced profitability due to regular maintenance impacts."
Researcher Jung predicted that the trends in synthetic rubber, latex, and resins are likely to remain poor for the time being. However, he believes that Kumho Petrochemical's 13.4% holdings of treasury stocks could undergo reassessment because the government and ruling party are accelerating the legalization of mandatory stock buybacks.
Researcher Jung stated, "The treasury stocks held by Kumho Petrochemical are included in the previously announced three-year shareholder return policy and the 50% gradual buyback plan, and it has been confirmed that there are currently no changes to these plans."
He added, "However, if the mandatory buyback of treasury stocks is legislated, valuation attractiveness will arise," and noted, "The target stock price was set based on the assumption that 50% of the treasury stocks will be bought back by the end of 2025 and the end of June 2026."