[Click eStock] "Up 74% in 3 Months... Hyosung Chemical Still Undervalued"

Explosive Growth Compared to Last Year Throughout the First Half... "Stock Prices Are Still Cheap"

[Asia Economy Reporter Minwoo Lee] Although Hyosung Chemical's stock price has risen about 74% over the past three months, it is still considered undervalued. This is based on the expectation of steady performance driven by an increase in average selling price (ASP) in the first half of the year and weak raw material prices in the second half.

On the 19th, Daishin Securities maintained a 'Buy' rating on Hyosung Chemical and raised the target price by 100% to 500,000 KRW. The previous closing price was 302,000 KRW. This is because record-breaking earnings growth is expected this year.

First, it is forecasted that the consolidated sales for the first quarter will reach 579 billion KRW and operating profit 58.8 billion KRW. This represents a 36.3% increase in sales and a 373.7% increase in operating profit compared to the same period last year. Compared to the previous quarter, sales and operating profit are expected to increase by 21.7% and 192.5%, respectively. These figures also significantly exceed the market consensus provided by financial information firm FnGuide, which projected sales of 560 billion KRW and operating profit of 41 billion KRW.

In particular, operating profits from polypropylene (PP) and propane dehydrogenation (PDH) are expected to surge 367% compared to the previous quarter. This is because the Korean plants (PP/DH) are estimated to see a 16% increase in ASP due to the recovery of premium product sales, and the Vietnamese plant (PP) is beginning to stabilize operations, significantly reducing losses. Sangwon Han, a researcher at Daishin Securities, explained, "The rise in Korean ASP is thanks to the recovery of premium products for the U.S. market (accounting for 5-10%). After production disruptions caused by the cold wave, U.S. PP prices are currently twice as high as those in Asia."

Explosive growth is also expected in the second quarter. Daishin Securities forecasts that Hyosung Chemical will record sales of 580 billion KRW and operating profit of 66.7 billion KRW in Q2. This represents a 35.1% and 1768% increase, respectively, compared to the same period last year. Compared to Q1, sales and operating profit are expected to grow by 0.2% and 13.5%, respectively, continuing the growth trend. Although U.S. PP prices are expected to stabilize slightly downward, price defense is anticipated due to the recovery of premiums for products destined for China (accounting for about 35%), and the Vietnamese subsidiary's return to profitability is also seen as a positive factor.

Researcher Han stated, "The contract price (CP) for propane in Saudi Arabia this month is $560 per ton, down 10% from the previous month, and seasonal weakness is expected to continue with prices dropping to $480 per ton in July and August, steadily improving PP/DH profitability." He added, "Despite the stock price rising about 74% over the past three months, the price-to-earnings ratio (PER) based on expected 2022 earnings is only 3.5 times, indicating it is still absolutely undervalued."

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