Taekyung Chem
The author is an analyst for NH Investment & Securities. He can be reached at kyeongkeun.kang@nhqv.com -- Ed.
Taekyung Chem occupies top spot in the domestic CO2 product market. With the arrival of a big cycle for the shipbuilding industry, there is growing demand for liquid carbonic acid for use in welding. And, demand for dry ice is rising alongside fresh food market growth. In keeping, the firm should be able to achieve further ASP hikes this year, with its supply growth to continue climbing next year thanks to capacity expansion effects.
Korea’s number-one CO2 product provider
Taekyung Chem stands as the top name in Korea’s CO2 product market. Using by-product gas (CO2) generated from oil refining and petrochemical processes, it makes high-purity liquid carbonic acid and dry ice. The company boasts the largest domestic share (25%) of the liquid carbonated acid market. Of note, the major demand sources for liquid carbonated acid include players in the shipbuilding (welding), dry ice, food and beverage, and semiconductor (cleaning) fields.
Going forward, demand for liquid carbonic acid for use in welding is set to rise alongside the arrival of a shipbuilding industry big cycle. With shipbuilders accounting for 60% of overall domestic liquid CO2 demand, Taekyung Chem has established a sales base in Ulsan for its shipbuilding industry clients, which include all of the big-3 domestic shipbuilders. Moreover, alongside fresh food market expansion, demand for dry ice is also showing a structural growth trend. Taekyung Chem occupies the largest share (34%) of the domestic dry ice market share, supplying to SSG, Oasis, GS Retail, CJ Logistics, among other major clients.
P to rise this year, with Q to follow from next year
We believe that Taekyung Chem’s CO2 product margins are improving on more favorable product-raw material price spreads. Amid an industry environment wherein CO2 product supply is limited at the same time as raw material prices running flat, the company’s ASPs are primed to further hike thanks to increased demand for both liquid carbonic acid (for use in welding) and dry ice.
Via its raw material supply contract with LG Chem, we expect Taekyung Chem’s production capacity to more than double from the current 500 tons/day to 1,100 tons/day in 1H24. This year, an uptrend in P (price) should translate into profitability improvement, and from next year, we anticipate that stronger Q (quantity) following capacity expansion will drive earnings growth.