[Click e-Stock] "KCC: Higher 'Samsung C&T Asset Value'... Target Price Raised"

Silicone Recovery Remains Slow, But Asset Value Rises

"Buy" Rating Maintained, Target Price Raised to KRW 652,000

LS Securities has maintained its "buy" investment opinion on KCC, raising its target price from KRW 648,000 to KRW 652,000, reflecting the increased asset value due to its stake in Samsung C&T.

According to LS Securities on April 22, analyst Jung Kyunghee stated, "Currently, under the SOTP (sum-of-the-parts) valuation method, the asset value from holding Samsung C&T shares outweighs the earnings value. As a result, we revised our projections and maintained the 30% discount rate for the value of the Samsung C&T stake, thereby adjusting the target price."

Expectations for shareholder return policies are also a positive factor for the share price. Recently, Truston Asset Management sent a public letter requesting the monetization of Samsung C&T shares and the cancellation of treasury shares. Last month, KCC announced a plan to cancel treasury shares. Analyst Jung explained, "We believe the impact of shareholder letters has increased due to revisions to the Commercial Act, and we look forward to plans to reestablish shareholder value, including the monetization of Samsung C&T shares."

However, the first quarter results are expected to be somewhat sluggish due to weakness in KCC’s core silicone business. KCC’s first quarter sales are estimated at KRW 1.5871 trillion (down 1% year-on-year), with operating profit at KRW 80.1 billion (down 22.6% year-on-year). Analyst Jung noted, "While the building materials division is expected to maintain a solid margin despite weak domestic construction demand, continued weakness in the silicone division, which accounts for 49% of sales, remains an issue." She attributed this to the significant impact of oversupply of generic products from China.

KCC’s consolidated sales for this year are projected at KRW 6.631 trillion, with operating profit estimated at KRW 324 billion. The return on equity (ROE) is expected to be around 18.1%, while the price-to-earnings ratio (PER) is anticipated to be at the level of 3.1 times. The rebound is expected to begin in the second half of the year. Analyst Jung added, "Overseas competitors are undergoing restructuring and price increases for generic silicone, and expectations for industry improvement in the second half are rising."

This content was produced with the assistance of AI translation services.