[Click eStock] "Kolon Industries, Key to Stock Price Rise is Film Business Division"

Shinyoung Securities Report
"Expansion of Customer Base in CPI Film Sector Needed"

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating and a target price of 50,000 KRW for Kolon Industries on the 4th. Although the company is expected to gradually emerge from the impact of the novel coronavirus disease (COVID-19) in the second half of the year, securing clients related to the film business is considered crucial for a substantial stock price increase.

In the second quarter, Kolon Industries recorded an operating profit of 36.8 billion KRW. The operating profit in the industrial materials sector was 10.9 billion KRW, down 56% compared to the same period last year. This was because the operating rates of global tire manufacturers recovered compared to the first quarter but remained significantly lower than last year due to the impact of COVID-19. Demand for airbags and engineering plastic products also remained weak.

The operating loss in other sectors expanded to 7.9 billion KRW compared to the previous year, largely due to poor polyester performance at Kolon Materials. The film sector saw only a 15% decline compared to a year ago, thanks to strong performance from its Chinese Huizhou and Indonesian subsidiaries. The fashion sector fell 14% due to decreased demand caused by COVID-19, while the chemical sector maintained steady results despite regular maintenance, benefiting from low-cost raw material inputs due to falling oil prices.

Although the automotive industry's recovery was insufficient due to the ongoing impact of COVID-19, better performance is expected in the third quarter. Ji-yeon Lee, a researcher at Shin Young Securities, explained, “Operating rates of tire manufacturers are recovering, which will boost earnings. Although profits in the fashion and chemical sectors will decline, the industrial materials sector has a large share, so the effect of earnings recovery will be greater.” Since February this year, aramid production has increased from 5,000 tons to 7,500 tons, and volume growth effects are expected if demand improves.

However, a factor that could affect the company's stock price is securing new clients for transparent polyimide film (CPI). While the normalization of operating results in the industrial materials sector is expected due to the recovery of operating rates in upstream businesses, additional growth in the CPI film sector is necessary for the stock price to rise. Researcher Ji-yeon Lee said, “As the foldable phone market is entering a growth phase, further growth is expected. Domestic and Chinese foldable smartphone developers are conducting CPI film tests, indicating sufficient potential for growth.”

This content was produced with the assistance of AI translation services.