[Click eStock] "Kolon Industries' Aramid and Hydrogen Parts Business Will Contribute to Growth"

Already Possessing Global 3rd Largest Aramid Production Capacity While Demand Expected to Expand This Year
Momentum from Domestic and International Hydrogen Policies to Reflect in Mid- to Long-Term Performance

▲Kolon Industries Gumi Plant Panorama

[Asia Economy Reporter Gong Byung-sun] Aramid, known as a super fiber, is expected to bring short-term profits to Kolon Industries. In the mid to long term, the hydrogen parts business is anticipated to be reflected in the company’s performance. Accordingly, Meritz Securities has raised Kolon Industries’ target stock price from the previous 53,000 KRW to 60,000 KRW, maintaining a ‘Buy’ rating.

Kolon Industries is evaluated to have excellent competitiveness in the aramid production sector. Aramid is a fiber with strength that even bullets cannot penetrate, heat resistance that prevents burning, and chemical resistance that prevents corrosion by chemical substances. Aramid is broadly divided into para-aramid and meta-aramid, with para-aramid production considered to have a higher entry barrier. Kolon Industries produces high value-added para-aramid and possesses pricing power.

Kolon Industries secured short-term growth momentum by deciding to expand aramid production facilities in the first half of this year. It already has a production capacity of 7,500 tons, ranking third globally, and demand is expected to increase this year. Researcher Noh Woo-ho from Meritz Securities stated, “We estimate the profit contribution from aramid this year to be 55 billion KRW.” In the mid to long term, the company plans to have an aramid production scale exceeding 10,000 tons.

The hydrogen parts business is expected to be a mid to long-term growth driver. The moisture control device that maintains the appropriate humidity of existing hydrogen fuel cells is currently supplied to Hyundai Motor Company, and in the first half of this year, mass production facilities for polymer electrolyte membranes (PEM) and membrane electrode assemblies (MEA), which are hydrogen fuel cell parts, will be established. Additionally, momentum from domestic and international hydrogen policies is likely to be reflected in mid to long-term performance expectations.

Reflecting this, Meritz Securities has raised Kolon Industries’ stock price target to 60,000 KRW. Researcher Noh said, “With the operating rates of front-end customers rising in the first half, most tire cord factories will be operational,” adding, “A turnaround to profitability is expected at the Vietnam subsidiary.” Tire cords are high-strength fiber reinforcements that serve as the skeleton inside tires and affect vehicle safety and performance.

Furthermore, Researcher Noh explained, “Shipments in the industrial materials sector are expected to increase after COVID-19,” and “Kolon Industries’ operating profit for the first quarter of this year is estimated at 50.6 billion KRW, a 96% increase compared to the same period last year, with annual operating profit projected at 194.7 billion KRW.” This figure is a 15% upward revision from Meritz Securities’ previous estimate.

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