[Click eStock] "Hyosung TNC Maintains Profit Growth Trend with Sales Price Increase"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained a buy rating on Hyosung TNC on the 3rd and raised the target price by 15% from the previous level to 1,150,000 KRW.

Hyosung TNC recorded an operating profit of 246.8 billion KRW in the first quarter, growing 214% compared to the same period last year, far exceeding market expectations (185.5 billion KRW). This accounts for 93% of last year's annual operating profit (266.6 billion KRW).

It is analyzed that all business divisions improved their performance, resulting in strong earnings. The operating profit of the textile division was 226.9 billion KRW, growing 236% during the same period. Due to the input time lag effect, relatively low raw material prices were applied, and as supply tightened, the spread and intermediate profit of spandex improved sharply. The operating rate of domestic and overseas spandex factories continues to be 100%. Nylon and polyester yarns also showed improved performance due to increased sales of eco-friendly products.

The operating profit of the trade and other divisions was 19.9 billion KRW, up 79.3% compared to the same period last year. The improvement in the automotive and tire industries led to a surge in sales volume and intermediate profit of Vietnamese tire cords. Tight supply and demand in semiconductors and LCDs helped NeoChem in Quzhou, China maintain high profitability.

Hyosung TNC is expected to continue the trend of increasing operating profit in the second quarter. Prices of some raw materials such as PTMEG and MDI have peaked and are declining, and the price of BDO, a major raw material, is also falling due to the off-season for coal and the decline in oil and butadiene prices. Additionally, the company's average selling price of spandex, which was lower than the benchmark spot price in China, is expected to rise.

Researcher Dongwook Lee of Kiwoom Securities said, “This year, as spandex supply tightens, EBITDA before depreciation is expected to exceed 1 trillion KRW,” adding, “The company is expected to secure cash to withstand a recession and accumulate large-scale facility investment funds to respond to additional expansions by Chinese competitors.”

Researcher Lee also said, “Although some view the first quarter as the peak of performance, considering price increases until the fourth quarter, raw material price declines, and the effects of proactive overseas investments, solid performance growth is expected to continue.”

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