[Click eStock] "World No.1 Hyosung Advanced Materials, 1Q 'Earnings Surprise' Expected"

Improvement in Tire Reinforcement Material Performance and Utilization Rate... Specialty Fibers Also Steady

[Asia Economy Reporter Minwoo Lee] Hyosung Advanced Materials is expected to record an 'earnings surprise' in the first quarter of this year. This outlook is based on improvements in the performance and operating rate of its core business segment, tire reinforcement materials, as well as the continued strong profitability of its specialty fibers division.

On the 4th, Kiwoom Securities forecast that Hyosung Advanced Materials will record sales of 751 billion KRW and an operating profit of 52.1 billion KRW in the first quarter of this year. Compared to the same period last year, sales are expected to increase by 9.1%, and operating profit by 82.9%. The operating profit is anticipated to significantly exceed the recently raised market consensus of 43 billion KRW, constituting an 'earnings surprise.'

The operating profit of the core tire reinforcement materials segment is expected to reach 33.3 billion KRW, a 69.7% increase compared to the first quarter of last year. Despite some volume reductions due to the Chinese Lunar New Year and other factors, sales volumes of automotive and tire manufacturers in the upstream market are increasing, and selling prices are rising due to recovery in key demand markets such as Europe and the United States. Operating rates at Hyosung Advanced Materials' domestic and overseas textile tire reinforcement plants are also expected to improve. Additionally, profit improvement effects are occurring in the steel cord segment due to equipment relocation and restructuring completion.

Operating profit in other segments is also estimated to increase by 112.0% year-on-year to 18.9 billion KRW. Dongwook Lee, a researcher at Kiwoom Securities, stated, "Due to tight supply and demand conditions for spandex, the performance of the Vietnam spandex plant, which ranks seventh globally in single production capacity, will continue to be strong," and added, "The specialty fibers division, including carbon and aramid fibers, is expected to maintain solid performance."

From the second half of this year, the effects of aramid capacity expansion are also expected to materialize. Hyosung Advanced Materials is scheduled to mechanically complete the aramid expansion facility next month. The expansion effect (from 1,250 tons to 3,750 tons) is expected to be fully reflected starting in July. Although the production capacity is 3,750 tons, actual output is likely to improve further through process enhancements. The researcher explained, "Aramid is used to reinforce stiffness by blending with nylon in the cap ply section of tires for electric vehicles," and added, "The increased production will be immediately absorbed, positively impacting second-half performance."

Based on these factors, Kiwoom Securities maintained a 'Buy' investment rating and a target price of 430,000 KRW for Hyosung Advanced Materials. The closing price on the previous day was 299,500 KRW. The researcher analyzed, "Despite capital constraints among global carbon fiber companies due to COVID-19, demand for carbon fiber related to hydrogen storage vessels is expected to surge," and noted, "Especially with investments expanding not only in hydrogen vehicles but also in hydrogen transportation, the tube trailer market is growing. In this context, Hyosung Advanced Materials, the only domestic integrated precursor carbon fiber company, deserves a premium."

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