iM Securities on the 23rd maintained a Buy rating on UNID, saying it expects a boost from strong results at the China subsidiary and a windfall from geopolitical risks, and raised its target price by 10% to 110,000 won. UNID's previous day closing price was 81,200 won.
UNID's operating profit in the first quarter of this year was 25.5 billion won, up 236% from the previous quarter.
iM Securities said that while this slightly missed the market consensus of 27.0 billion won, both domestic and overseas subsidiaries showed balanced growth.
For the domestic subsidiary, sales volume rose 11% from the previous quarter as regular maintenance ended, and profits increased as related one-off expense disappeared.
The top driver of the improved results was the China subsidiary. As supply and demand for potassium chloride in China have become unstable, selling prices have been steadily rising since the second half of last year.
In particular, changes in the global fertilizer market due to the recent Iran situation are expected to be a boon for UNID. With supply disruptions from Iran destabilizing supply and demand for nitrogen (N) and phosphate (P) fertilizers, demand is surging for potassium (K) fertilizers as a substitute.
Jeon Yu-jin, an analyst at iM Securities, said, "With the impact of the Iran situation, additional price hikes and higher sales volumes for potassium fertilizers are expected," adding, "The China subsidiary will post results that exceed expectations this year and drive the companywide performance."
Jeon added, "As instability in potassium chloride supply persists and substitute demand for fertilizer grows, additional price hikes and higher sales volumes are expected," and "the profit contribution of the China subsidiary will increase, making the uptrend in results more pronounced."