[Click eStock] "Hyosung Advanced Materials, Q1 Earnings Surprise Expected"

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities expects Hyosung Advanced Materials to improve its core business segment, tire reinforcement materials, in the first quarter of this year, forecasting an earnings surprise.

Hyosung Advanced Materials is expected to report an operating profit of 52.1 billion KRW in the first quarter of this year, an increase of 82.9% compared to the same period last year. This is expected to significantly exceed the recently sharply raised market expectations of 43 billion KRW. This is due to the improvement in performance and operating rate of the core business segment, tire reinforcement materials, and the continued strong profitability of special fibers (aramid and carbon) in other segments, along with the anticipated spread increase of the Vietnam spandex business.

The operating profit of the tire reinforcement materials segment is projected to be 33.3 billion KRW, a 69.7% increase year-on-year. Although there were concerns about some volume decreases due to the Chinese Lunar New Year, selling prices are rising due to increased sales volumes from upstream automobile and tire manufacturers and the recovery of key demand markets such as Europe and the United States. Additionally, the operating rates of domestic and overseas textile tire reinforcement plants are expected to improve, and the completion of equipment relocation and restructuring is showing profit improvement effects in the steel cord segment.

The operating profit of other segments is expected to be 18.9 billion KRW, a 112.0% increase compared to the same period last year. Due to the tight supply and demand situation for spandex, the Vietnam spandex plant, which ranks 7th in the world based on single production capacity, is expected to continue its strong performance. Furthermore, the special fibers segment, including carbon and aramid, is expected to maintain favorable results.

The company plans to mechanically complete the aramid expansion facility in April this year. From July, the effects of the expansion (from 1,250 tons to 3,750 tons) will be fully reflected, and although the production capacity is 3,750 tons, actual production volume is expected to improve further through process improvements. Aramid is used to reinforce stiffness by mixing with nylon in the cap ply part of tires for electric vehicles. The immediate absorption of the increased production is expected to positively impact the company's performance in the second half of the year.

Lee Dong-wook, an analyst at Kiwoom Securities, said, "Despite capital constraints among global carbon fiber companies due to COVID-19, the surge in demand for hydrogen storage tanks is expected to drive related carbon fiber demand as well," adding, "With investment expanding not only in hydrogen vehicles but also in hydrogen transportation, the tube trailer market is also growing, so it seems necessary to assign a premium to the company, which is the only domestic integrated precursor carbon fiber company."

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