[Click eStock] "Hucems, Concerns Have Been Reflected"

Daishin Securities "Target Price 30,000 KRW, Maintain 'Buy' Rating"
"Hucems' Bottom Range is 20,000 KRW... Concerns Fully Reflected"

Huchems is actively entering the carbon credit business by taking the lead in the CDM project. The photo shows Huchems production facilities equipped with gas reduction equipment.

[Asia Economy Reporter Gong Byung-sun] Although Huchems' stock price was shaken by the news that Hanwha Solutions will produce dinitrotoluene (DNT) independently, the concerns have been sufficiently reflected in the stock price, and now the focus should be on the possibility of a rebound in carbon emission credit prices in the second half of the year, which could bring profits, according to an analysis.

On the 2nd, Daishin Securities maintained a target price of 30,000 KRW and a 'Buy' rating for Huchems. The target price was calculated by applying a price-to-book ratio (PBR) of 1.7 times to the 12-month forward book value per share (BPS).

Recently, Hanwha Solutions announced that it will produce DNT independently, causing Huchems' stock price to fluctuate significantly. Hanwha Solutions disclosed that it plans to invest 1.6 trillion KRW to secure an annual DNT production capacity of 180,000 tons, with a target operation year set for 2024. DNT is the main raw material for toluene diisocyanate (TDI), which is used to make artificial leather and is a core product of Huchems. Notably, Hanwha Solutions accounts for 70% of Huchems' customer base. This means the largest customer is effectively disappearing. Following Hanwha Solutions' announcement, Huchems' stock price fell by 14%.

Hanwha Solutions is also exploring business expansion into nitric acid and nitrobenzene. Huchems produces and sells nitric acid, nitrobenzene, DNT, and mononitrobenzene (MNB) based on ammonia, so this is an overall negative issue. Sangwon Han, a researcher at Daishin Securities, said, "In the worst case, Huchems' DNT operating rate could sharply decline, and 120,000 tons of nitric acid used for DNT production could become surplus resources," adding, "There is also a possibility of supply-demand deterioration and profitability damage overlapping with the operation of Huchems' new 6th plant."

However, Daishin Securities' analysis suggests that concerns have already been priced in and it is time to raise expectations for a rebound. Researcher Han explained, "Considering the worst performance and the past valuation bottom, the stock price floor is 20,000 KRW, and the current price is 22,000 KRW, so the negative factors have been sufficiently reflected," and added, "This year's annual operating profit is expected to maintain around 100 billion KRW, and actual performance will be better than concerns due to new customers and MNB conversion." He further stated that rather, in the second half of the year, it is time to raise expectations for the possibility of a rebound in the price of carbon emission credits, which have been sold at 1.65 million tons annually.

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