Korean energy stocks rally on potential east coast oil reserves

This photo shows the sea off Yeongil Bay in Pohang. [Photo by Yonhap]

South Korean oil and gas stocks continued to rise on Tuesday after the government officially announced that up to 14 billion barrels of oil and gas may be buried off the coast of Yeongil Bay in Pohang, North Gyeongsang Province.

Shares of Korea Gas Corp. were trading 11.5 percent higher at 43,150 won ($31.4) as of 10:36 a.m. The stock closed at 38,700 won on Monday, up from Friday’s closing of 29,800 won.

Shares of Korea Petroleum Industries Co. also hit the ceiling for the second day in a row, gaining 27.86 percent as of 10:38 a.m.

Other stocks that gained ground are Steel pipe maker Dongyang Steel Pipe Co., HS Valve Co, Daesung Energy Co., Hung-gu Oil Ltd., Joong Ang Enervis Co., GSE Co., and Histeel Co.

Shares of Lotte Wellfood Co., in the meantime, hit a 52-week high on Tuesday amid improved earnings prospects.

Shares of Lotte Wellfood were trading 7.66 percent higher at 158,900 won as of 10:40 a.m.

Hanwha Investment & Securities Co. raised its price target for Lotte Wellfood‘s shares to 220,000 won from 190,000 won, citing expectations of improved domestic and international profits due to new product launches.

“Lotte Wellfood’s operating profit for the second quarter of this year is expected to be 64.6 billion won, up 33 percent from the same period last year, matching the consensus of 63.9 billion won,” said Hanwha Investment Analyst Han Yoo-jung.

The launch of the new ZERO frozen dessert in April is expected to boost the company‘s frozen dessert sales, while sales in India are also expected to increase by 16 percent, Han said.

With the success of Lotte Choco Pie in India and the addition of a third production line in October last year, the overall operation capacity rate in India approached 90 percent in the first quarter, raising expectations for the launch of a second product in the middle of next year, Han said.

The analyst expected the completion of the frozen dessert plant in Pune, India, to accelerate the launch of new brands.

Han projected the company’s annual operating profit this year is expected to increase 37 percent to 243 billion won from 177 billion won last year. Next year‘s operating profit is projected to increase 14 percent from this year to 278 billion won.