1. What Happened at SH Energy & Chemical?

SH Energy & Chemical reported an earnings shock in Q1 2025 with revenue of KRW 25.3 billion, an operating loss of KRW 3.2 billion, and a net loss of KRW 2.8 billion. This significant underperformance compared to market expectations (0 KRW) has caused investor concern.

2. Why These Results?

  • Synthetic Resin Business Decline: Sales in the synthetic resin manufacturing sector plummeted by 55% year-on-year due to the construction market downturn, increased low-priced imports, and expansion of substitute markets.
  • Resource Development and Management Consulting Underperformance: Shale gas sales remained negligible, and the management consulting sector struggled to improve performance due to a challenging market environment.
  • Increased Cost Burden: Despite a decrease in SM prices, the rise in LRL prices has exacerbated the cost burden. The rising USD/KRW exchange rate and the global interest rate hike trend are also contributing to financial pressure.

3. What’s Next?

Downward pressure on the stock price is expected in the short term. However, there is potential for mid-to-long-term recovery through successful market entry and overseas expansion of high-value-added products (DUOPOL, ZEROPOL), securing cost competitiveness, and efficient financial management.

4. What Should Investors Do?

  • Cautious Investment: Rather than short-term investment, it’s crucial to observe and carefully monitor the company’s recovery potential.
  • Strengthening Core Business Competitiveness: Securing new revenue streams through commercialization of high-value-added products and expanding into overseas markets is essential.
  • Securing Financial Soundness: Efforts to manage cash liquidity and stabilize debt ratios are critical.
  • Monitoring Macroeconomic Variables: Continuously monitor the impact of macroeconomic variables such as exchange rates, interest rates, and raw material price fluctuations.