Korea Petro Chemical Ind

Founded in 1970 and listed on the Korea Exchange in 1999, Daehan Petrochemical is a leading naphtha cracking center (NCC) based petrochemical company with vertically integrated production facilities spanning basic feedstocks to synthetic resins across its Ulsan and Onsan industrial complexes.

As of 2025, revenue mix consisted of roughly 45% from basic feedstocks and monomers such as ethylene and propylene, about 39% from polymers including polyethylene (PE) and polypropylene (PP), and around 2% from industrial gases, with utility and salt operations added after LNG/LPG power generation subsidiary Hanju was consolidated starting in Q2 2025, contributing about 13.55% and 1.05% of revenue respectively.

Among Korea's three major NCC operators, the company runs a comparatively simple business portfolio but differentiates itself through a global number-one market share in separator materials, holding 180,000 tons of wet-process separator-grade PE capacity and 70,000 tons of dry-process separator-grade PP capacity.

Key customers include secondary battery separator makers such as SK IE Technology and WCP, and the share of power-infrastructure-oriented specialty products such as flame-retardant PP for ESS battery modules and capacitor-grade PP has been steadily expanding.

The company benefits from a stable feedstock supply structure, sourcing a substantial portion of naphtha from nearby S-Oil, giving it a relatively favorable position versus peers on raw material procurement.

Hanju supplies electricity, steam, and water utilities to companies within the Ulsan industrial complex, functioning as a stable earnings source with low correlation to petrochemical cycle swings.

The company also operates production facilities for various derivative products including butadiene, BTX, and EO/EG, broadening its product portfolio.

Daehan Petrochemical posted operating losses of KRW 214.6bn in 2022, KRW 62.3bn in 2023, and KRW 59.9bn in 2024, before turning around in 2025 with consolidated operating profit of KRW 52.7bn and owner net income of KRW 31.7bn.

Revenue expanded from KRW 2.222 trillion in 2022 to KRW 3.348 trillion in 2025, accompanied by top-line growth.

On a quarterly basis, Q2 2025 revenue was KRW 846.8bn with an operating loss of KRW 4.6bn, though owner net income stayed marginally positive at KRW 1.4bn; Q3 2025 saw a sharp improvement as the Hanju consolidation effect fully materialized, with revenue of KRW 909.9bn, operating profit of KRW 42.8bn, and owner net income of KRW 29.9bn.

In Q4 2025, revenue reached KRW 849.5bn with operating profit of KRW 24.3bn, maintaining the operating-level profit trend, though owner net income turned negative at KRW -2.6bn due to one-off factors.

Q1 2026 delivered the strongest quarterly result in recent years, with revenue of KRW 847.1bn, operating profit of KRW 73.6bn, and owner net income of KRW 54.5bn, largely reflecting an inventory lagging effect from the naphtha price spike triggered by the Hormuz Strait disruption.

However, Q2 2026 reverted to a loss despite higher revenue of KRW 956.3bn, with an operating loss of KRW 3.9bn and owner net loss of KRW 8.1bn, as the temporary inventory effect from Q1 faded and cost pressures re-emerged.

Trailing four-quarter owner net income (Q3 2025 through Q2 2026) totaled KRW 73.7bn, already exceeding the full-year 2025 result on an annualized basis.

Overall, the company's earnings trajectory reflects the simultaneous influence of structural improvement (the Hanju consolidation, expanding high-value-added product mix) and geopolitical volatility (cost and inventory swings tied to Hormuz risk), widening the quarter-to-quarter dispersion in results.

The armed conflict between the United States/Israel and Iran that erupted in late February 2026 severely restricted transit through the Strait of Hormuz, and since roughly 80% of global naphtha volumes pass through the strait, domestic petrochemical companies faced a direct shock to feedstock supply and cost structures.

Even after the US-Iran ceasefire in June, normalization of war-risk insurance premiums and clearing of vessel backlogs has taken time, with some analysis suggesting Hormuz transit remained at only about 30% of normal levels as of July 2026.

Korea's NCC industry has struggled for years amid global oversupply, and the government is pursuing a restructuring policy targeting 3.7 million tons of adjustment out of 12.8 million tons of domestic NCC capacity; the Ulsan-area targets include Daehan Petrochemical with 900,000 tons of capacity, SK Geo Centric with 660,000 tons, and S-Oil with 200,000 tons, raising the possibility that Daehan, as the leading operator, could be relatively favorably positioned through the restructuring process.

At the same time, global ethylene capacity additions are projected to fall to 3.01 million tons in 2026 from 5.84 million tons in 2025, suggesting supply pressure could ease over the medium term.

Versus peers, Daehan Petrochemical has been noted alongside SK Geo Centric as one of the few domestic operators maintaining NCC utilization above 90%, though Hormuz-related risk temporarily pushed utilization down into the 60% range before a government-supported rebound to 72%, underscoring heightened volatility.

In the secondary battery separator market, demand for related materials has remained resilient on the back of expanding ESS demand, diverging from the broader slump in commodity-grade product categories.

Management expects the Hanju consolidation effect to be fully reflected from the second half, supporting the profit trend, and anticipates steady growth in secondary-battery-related exports such as separator-grade HDPE. However, brokerage views have shifted over time.

DB Financial Investment, in a July 20, 2026 report, cited a Q2 operating loss and inventory valuation losses and lowered its target price from KRW 270,000 to KRW 180,000, citing that Hormuz transit remained at only about 30% of normal levels even after the ceasefire.

Yuanta Securities, in a March 2026 report, also lowered its target price to KRW 200,000 to reflect rising raw material cost burdens from the Hormuz blockage while maintaining a buy call, projecting 2026 revenue of KRW 3.656 trillion and operating profit of KRW 70.1bn.

Both brokerages flagged utilization and spread volatility as near-term burdens but placed more weight on medium-term industry improvement from aging capacity closures and reduced new capacity additions.

Hana Securities cautioned that current results involve a degree of illusory effect, taking the view that a trend judgment is only possible once the Strait of Hormuz fully normalizes and macro risk subsides.

The future earnings trajectory is likely to depend heavily on the pace of Hormuz transit normalization, the concreteness of NCC restructuring policy, and the durability of specialty demand in separator materials and ESS.