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Lingering uncertainty over receivables and dividends

4Q23 review: Massive impairment losses result in net loss

For 4Q23, KOGAS posted revenue of W10.61tr (-41.6% YoY). Sales volume decreased amid an economic slowdown and sluggishness in LNG-powered electricity generation. Meanwhile, operating profit fell 52.6% YoY to W529.7bn, affected by a tough comparison (resulting from working capital adjustments in 4Q22; roughly W400bn) and wholesale cost settlement (W62bn). At the net level, the company recognized impairment losses of W827.1bn (W434.4bn overseas and W392.7bn domestically), leading to a net loss of W660bn.

Maintain TP of W27,000, but downgrade to Hold

We maintain our target price of W27,000 on KOGAS but downgrade our rating to Hold (from Trading Buy). Our target price corresponds to a 2024F P/B of 0.23x. The stock is currently trading at a P/B of 0.2x, close to its historical low. However, due to excessive borrowing, its EV/EBITDA is higher than the global peer average (9x). Before taking a buy-on-weakness approach, we advise waiting until the company improves its financial structure, thus easing uncertainty over the resumption of dividends.









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