[Click eStock] "Lionchemtech, Potential Expansion into Synthetic Wax for Automotive and Solar Industries '↑'"

[Asia Economy Reporter Yoo Hyun-seok] SK Securities analyzed on the 26th that Lionchemtech's synthetic wax business has a high possibility of expanding into areas such as automobiles, solar power, and footwear. No investment opinion or target price was presented.

Lionchemtech is engaged in the artificial marble and synthetic wax businesses. Artificial marble is a construction interior and exterior material used for kitchen countertops, high-end interior finishes, and bathrooms. Synthetic wax is a white powder additive used as a performance enhancer added during the processing of plastics, fibers, paints, adhesives, and more.

As of the third quarter of this year, the sales ratio is 77% artificial marble and 20% synthetic wax. The third-quarter sales amounted to 32.1 billion KRW, and operating profit was 4.9 billion KRW. While sales decreased by 18% compared to the same period last year, operating profit increased by 34%. Due to the economic downturn caused by the spread of COVID-19, the front industries were sluggish, resulting in a decrease in sales compared to the previous year. However, the decline in oil prices improved cost burdens, leading to an increase in operating profit margin.

Regarding artificial marble, efforts are underway to enter new markets. Researcher Lee So-jung of SK Securities said, "Lionchemtech is expanding the application areas of artificial marble from mainly housing to construction and leisure industries. In recent years, supplying artificial marble to large construction companies has led to external growth, and as the camping car market expands, demand for artificial marble needed for camping car interiors is continuously increasing." He added, "In addition to the European, American, and domestic markets, new clients are being sought in emerging markets such as the Middle East, Saudi Arabia, and Vietnam, where construction and housing markets are expanding."

For the company's other business area, synthetic wax, an expansion of application scope is expected. He stated, "Lionchemtech is developing new products for synthetic wax and is highly likely to enter the automobile, solar power, and footwear industries in the future. Currently, the main use of the company's synthetic wax is as an additive to complement the weaknesses of plastics and enhance their properties. The new products under development are expected to provide additional functional improvements rather than simply replacing existing products."

The researcher emphasized, "The company currently holds the number one market share in the domestic synthetic wax market, and if new products are developed, commercialization and distribution are expected to proceed smoothly. The company's synthetic wax sales target for 2022 is 100 billion KRW, about four times the level of 2019, indicating a high level of investment and focus on the synthetic wax business."

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