[Click eStock] "OCI, Carbon Chemical Profitability Falls Short of Expectations...Target Price Lowered"

On September 30, Samsung Securities lowered its target price for OCI from 130,000 won to 110,000 won, reflecting weak profitability in the carbon chemical segment. The investment recommendation remains 'Buy'.

Hyunryul Cho, a researcher at Samsung Securities, stated, "We have lowered our target price due to an 11% downward revision in the forecast for 2027 earnings before interest, taxes, depreciation, and amortization (EBITDA). Although the carbon chemical division's profitability is disappointing compared to expectations, the company is expected to maintain a return on equity (ROE) of about 8% this year and next. With the 12-month forward price-to-book ratio (PBR) at only 0.52 times, the valuation remains attractive," he explained.

Samsung Securities forecasts OCI’s operating profit for the third quarter of this year to fall 25% from the previous quarter to 3.26 billion won, which is 32% below the market consensus of 4.8 billion won. By segment, basic chemical operating profit is estimated to increase 6% to 1.92 billion won, while carbon chemical operating profit is expected to drop 36% to 1.97 billion won.

Researcher Cho analyzed, "Despite weakness in caustic soda and toluene diisocyanate (TDI), the basic chemicals business continued profit growth, driven by strong demand in semiconductor materials. In contrast, the carbon chemicals business saw profitability decline as the carbon black spread underperformed expectations." He noted that, due to the typical lag of 1.5 to 2.0 quarters between sales prices and costs, the sharp rise in oil prices in the first quarter began to be reflected in product prices, but with another oil price surge in the third quarter, cost increases were reflected earlier, further squeezing profitability.

Meanwhile, on the 29th, OCI announced its plan to withdraw from the TDI business, with the exit scheduled for December 18. The TDI business has consistently run at a loss, generating annual sales of around 150 billion won and an operating margin of approximately -10%. Although the second quarter saw a temporary profit due to the war in the Middle East, the division posted losses again in the third quarter.

Researcher Cho said, "The withdrawal from this business illustrates the company’s commitment to a profitability-focused management approach," adding, "From next year, this move is expected to contribute to improved profitability in the basic chemicals segment."

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